Chapter 3

View Current PDF

Question:

Authorised Representatives will be required to provide their email addresses to the Exchange. Is this requirement applicable to existing Authorised Representatives?

Answer:

Yes, it does apply to existing Authorised Representatives.

FAQ Series 17, FAQ No. 9
LR reference: Main Board Rules 3.06 / GEM Rules 5.25
Released on 19/12/2011

Question:

If issuers do not follow the guides named in the Note ("A Guide on Directors' Duties" issued by the Companies Registry, and the Guidelines for Directors and Guide for Independent Non-executive Directors published by the Hong Kong Institute of Directors), do they breach the Listing Rules?

Answer:

No. These guides are suggested as resources for directors looking for further guidance on their duties and responsibilities to an issuer.

FAQ Series 17, FAQ No. 10
LR reference: Main Board Rules Note to Rule 3.08 / GEM Rules Note to Rule 5.01
Released on 19/12/2011

Question:

The Corporate Governance Guide for Boards and Directors (Guide) published by the Exchange in December 2021 provides the best practice guidance for the delivery of good corporate governance, if issuers do not follow the Guide, do they breach the Listing Rules?

Answer:

No. The Guide aims to provide practical advice to boards and directors, and in some cases, set out the expectations placed on directors. However, the Guide does not form a part of the Listing Rules, nor do they amend or vary any Rule requirements, or absolve issuers and/or their directors of any obligations to make their own judgment.

FAQ Series 17, FAQ No. 10A
LR reference: Main Board Rules Note to Rule 3.08 / GEM Rules Note to Rule 5.01
Released on 01/01/2022

Question:

Clarify the requirement of "appropriate professional qualifications".

Clarify the requirement of "appropriate accounting and related financial management expertise".

Answer:

For the requirement of “appropriate professional qualifications”, we normally refer to professional accounting qualifications.

For a candidate with other professional qualifications, we have set out our expectations in the note to Main Board Rule 3.10(2)/ GEM Rule 5.05(2). Issuers should also consider whether based on the experience and expertise of the candidate, the individual can fulfil the requirement under Main Board Rule 3.10(2)/ GEM Rule 5.05(2).

FAQ Series 17, FAQ No. 10B (Previously published in FAQ Series 1 No.2)
LR reference: Main Board Rules 3.10(2) / GEM Rules 5.05(2)
Released on 30/3/2004 (Updated on 28/12/2018)

Question:

Is a professional qualification obtained from an overseas jurisdiction acceptable, such as a PRC or Singapore qualified accountant?

Answer:

Yes, a professional qualification obtained from a recognised body in an overseas jurisdiction would be acceptable.

FAQ Series 17, FAQ No. 10C (Previously published in FAQ Series 1 No.3)
LR reference: Main Board Rules 3.10(2) / GEM Rules 5.05(2)
Released on 30/3/2004

Question:

Can a solicitor be said to have appropriate professional qualifications, or does the individual need to have the appropriate experience?

Answer:

A legal qualification is not considered to be an appropriate professional qualification even if the person has obtained some accounting knowledge in the course of their studies. A person with a legal qualification is acceptable if the person has the “appropriate accounting and related financial management expertise” required under the Rules. The Exchange may question the factors the board has considered when making the decision to accept a person.

FAQ Series 17, FAQ No. 10D (Previously published in FAQ Series 1 No.4)
LR reference: Main Board Rules 3.10(2) / GEM Rules 5.05(2)
Released on 30/3/2004 (Updated on 28/12/2018)

Question:

Can a person who has served on the audit committee of an issuer for a number of years be considered to have the appropriate accounting and related financial management expertise required under the rules?

Answer:

Please refer to the note to Main Board Rule 3.10(2)/ GEM Rule 5.05(2) as to what the appropriate expertise means. Prima facie, we would not consider a person whose only experience has been a member of an audit committee to fulfil the criteria set out in the note to the Rule.

FAQ Series 17, FAQ No. 10E (Previously published in FAQ Series 1 No.5)
LR reference: Main Board Rules 3.10(2) / GEM Rules 5.05(2)
Released on 30/3/2004 (Updated on 28/12/2018)

Question:

Is experience with a non-public company acceptable as having the appropriate accounting and related financial management expertise?

Answer:

Generally no, but the Exchange recognises that experience and scope of duties of a candidate may demonstrate that the individual is capable of discharging the role required of such person as set out in Main Board Rule 3.10(2)/ GEM Rule 5.05(2). It is up to the board to evaluate the totality of the individual's experience and education to consider if the individual is acceptable.

FAQ Series 17, FAQ No. 10F (Previously published in FAQ Series 1 No.6)
LR reference: Main Board Rules 3.10(2) / GEM Rules 5.05(2)
Released on 30/3/2004 (Updated on 28/12/2018)

Question:

How does the board assess if the commitment of an independent non-executive directors (INEDs) or non-executive directors (NEDs) to the issuer’s affairs is sufficient (especially for smaller issuers that have infrequent changes to their business or group structure) when normally they are not required to be involved in the management of the issuer?

Answer:

The Code recognises that different directors have different roles and functions within the issuer. The time commitment required from a director varies from issuer to issuer and from year to year, depending on the issuer’s operations. A NED’s time commitment to the issuer is likely to be less than an ED’s because a NED is not involved in the day-to-day running of the business. According to the Code, the issuer should determine how much time it needs from each of its directors and review whether the director is meeting that requirement.

You may refer to the Guide and Directors’ E-Training webcast entitled “INEDs’ Role in Corporate Governance”.

FAQ Series 17, FAQ No. 11
LR reference: Main Board Rules 3.08 / GEM Rules 5.01
Released on 19/12/2011 (Last updated on 01/01/2022)

Question:

If an existing NED meets the independence requirements, can the NED be re-designated as an INED? Does an announcement need to be made for the re-designation?

Answer:

Yes, an existing NED may be re-designated as an INED, but we will consider the individual’s present or past relationship with a connected person or the issuer on a case-by-case basis. Where, in order to meet the Rule requirements, a director needs to comply with any relevant cooling off period under the Rules, the relevant cooling off period needs to have ended by the date on which the individual confirmation of independence is given.

An announcement will need to be made for the redesignation from being a NED to an INED pursuant to Main Board Rule 13.51(2)/ GEM Rule 17.50(2).

FAQ Series 17, FAQ No. 11A (Previously published in FAQ Series 1 No.7)
LR reference: Main Board Rules 3.13 / GEM Rules 5.09
Released on 30/3/2004  (Updated on 28/12/2018)

Question:

If a NED of an issuer is a legal adviser (say, a partner of a law firm) but for the past two years such director has not provided any services to the issuer, and also such director fulfils the other factors under the Main Board Rule 3.13/ GEM Rule 5.09, does this mean that such a NED can be an INED of the issuer?

If the individual is accepted as an INED and in the future the individual provides services to the issuer again, will the individual continue to be considered independent?

Answer:

Yes, the individual can act as an INED provided that the individual’s firm is not providing or has not provided services to parties set out in Main Board Rule 3.13(3)/ GEM Rule 5.09(3) within two years before the individual’s appointment as an INED.

As soon as the firm (whether or not the individual is directly involved) provides any services to parties set out in Main Board Rule 3.13(3)/ GEM Rule 5.09(3), the individual will immediately cease to be considered independent.

FAQ Series 17, FAQ No. 11B (Previously published in FAQ Series 1 No.8) 
LR reference: Main Board Rules 3.13 / GEM Rules 5.09
Released on 30/3/2004 (Updated on 28/12/2018)

Question:

An existing INED is a partner of a law / Certified Public Accountant (CPA) firm and this firm is currently providing legal / accounting services to parties set out in Main Board Rule 3.13(3)/ GEM Rule 5.09(3). Is this existing INED not qualified as “independent” and does the issuer need to appoint a new one? How is materiality of the interest determined when considering independence? Are there any specific definitions or figures (e.g. %) that can be used as reference?

Answer:

The individual is not qualified to act as an INED and the issuer may or may not appoint a new INED depending on whether the issuer has sufficient INEDs on the board. However, the individual can still act as a NED. Materiality must be assessed from the issuer’s as well as the director’s perspective. There is no specific figure – materiality needs to be determined on a case-by-case basis.

FAQ Series 17, FAQ No. 11C (Previously published in FAQ Series 1 No.9)
LR reference: Main Board Rules 3.13 / GEM Rules 5.09
Released on 30/3/2004 (Updated on 28/12/2018)

Question:

Once an INED has submitted to the Exchange the initial written confirmation concerning the INED’s independence comprising all the information required by Main Board Rule 3.13 / GEM Rule 5.09, what information must be included in the INED's annual confirmation of independence required to be provided to the listed issuer?

Answer:

Each INED is required to submit to the Exchange, at the same time as the submission of Form B/ H in Appendix 5 of the Main Board Rules or Form A/ B in Appendix 6 of the GEM Board Rules, a written confirmation regarding the INED's independence which must contain all the information required by Main Board Rule 3.13(a), (b) and (c)/ GEM Rule 5.09(a), (b) and (c). Each INED must provide to the issuer an annual confirmation regarding the INED's independence which must contain the information required by Main Board Rule 3.13 (a) and (c)/ GEM Rule 5.09 (a) and (c).

FAQ Series 17, FAQ No. 11D (Previously published in FAQ Series 8 No.9)
LR reference: Main Board Rules 3.13 / GEM Rules 5.09
Released on 28/11/2008 (Updated on 28/12/2018)

Question:

Can a SPAC issue SPAC Shares at nil consideration for the purpose of remunerating the independent non-executive directors (“INEDs”)?

Answer:

No. Subject to the provisions under Rule 3.13, an INED of a SPAC may subscribe for SPAC Shares with his own resources, provided that:

(a) the INED is a Professional Investor; and
(b) the number of SPAC Shares held by the INED will not result in the 1% cap on holdings by INEDs under Rule 3.13(1) being exceeded.

FAQ 102-2022 to 117-2022, FAQ No. 110-2022
LR reference: Main Board Rules 3.13, 18B.07
Released on 16/09/2022

Question:

For INEDs who fulfilled a one-year cooling off period and were appointed prior to 1 January 2019, would they be allowed to stay on if, on 1 January 2019, they are short of a two-year cooling off period provided they would be able to meet all other independence factors?

Answer:

In respect of the revised two-year cooling off period for professional advisers, the revised Rule (Main Board Rule 3.13(3) and (4) / GEM Rule 5.09(3) and (4)) will be grandfathered for INEDs appointed in 2018. It means that, if an INED was elected at an AGM held in 2018 at which time the INED had met the one-year cooling off period for a professional adviser, the INED may stay on even if the INED would not meet the new two-year cooling off requirement as at 1 January 2019. The individual will be able to serve their full term as an INED (unless there is an early termination).

FAQ Series 17, FAQ No. 11E
LR reference: Main Board Rules 3.13(3) and (4) / GEM Rules 5.09(3) and (4)
Released on 28/12/2018

Question:

For any INED appointment to be effected after 1 January 2019, would the Exchange request for independence confirmation from the immediate family members of those INED?

Answer:

The Listing Rules do not require independence confirmation from the immediate family members of the INED. The Exchange, under this Note, encourages the inclusion of an INED’s immediate family members’ connection with the issuer in the assessment of their independence.

FAQ Series 17, FAQ No. 11F
LR reference: Main Board Rules Note 2 to 3.13 / GEM Rules Note 2 to 5.09
Released on 28/12/2018

Question:

Directors/supervisors are required to provide their contact details to the Exchange using the contact details form as soon as practicable after their appointment.

(i)    Can a director/supervisor provide his address in either English or Chinese?
(ii)    Can a director/supervisor just provide his office phone number, instead of all the office, home and mobile numbers?

Answer:

(i)    Yes.
(ii)    A director/supervisor should provide the mobile number and the telephone number (office or home, or both).

FAQ Series N/A, FAQ No. 054-2019
LR reference: Main Board Rules 3.20, 19A.07A / GEM Rules 5.13A, 17.91A
Released on 01/03/2019 (Updated in February 2021)

Question:

As a transitional arrangement, existing directors and supervisors of listed issuers are required to provide their contact details to the Exchange by 31 March 2019.

(i)    Can an issuer submit a single form for all its existing directors and supervisors?
(ii)    Which “filing type” should be used for existing directors/supervisors? Are the directors/supervisors required to fill in the “effective date”?
(iii)    If the residential address of an existing director/supervisor remains the same as that in the DU Form previously submitted to the Exchange, does he need to include such information in the form?

Answer:

(i)    Yes.
(ii)    The issuer may submit the form with the filing type marked “first notification”. There is no need to fill in the “effective date” fields for existing directors and supervisors.
(iii)    Yes.

FAQ Series N/A, FAQ No. 055-2019
LR reference: Main Board Rules 3.20, 19A.07A / GEM Rules 5.13A, 17.91A
Released on 01/03/2019 (Updated in February 2021)

Question:

Can a NED who is a connected person of the issuer be a member of the Audit Committee?

Answer:

Although the Rules do not specifically prohibit this, we consider that members of the audit committee should be independent of connected persons.

FAQ Series 17, FAQ No. 11G (Previously published in FAQ Series 1 No.10)
LR reference: Main Board Rules 3.21 / GEM Rules 5.28
Released on 30/3/2004

Question:

Can the qualified accountant (also executive director) be appointed as the audit committee's secretary?

Answer:

We consider that the secretary of the audit committee should not be a person who is involved in the financial reporting function of the issuer.

FAQ Series 17, FAQ No. 11H (Previously published in FAQ Series 1 No.11)
LR reference: Main Board Rules 3.21 / GEM Rules 5.28
Released on 30/3/2004

Question:

Can the issuer's staff and executive directors be appointed as members of the remuneration committee as long as the committee is chaired by an INED and the majority of its members are INEDs?

Answer:

Yes. The Rules do not restrict issuers from appointing their staff or executive directors to act as members of the remuneration committee, as long as a majority of the remuneration committee are INEDs and it is chaired by an INED. However, the staff or executive directors must avoid actual or potential conflicts of interest. In case such conflicts arise, the staff or executive directors must excuse themselves from the meeting or abstain from voting on the relevant decisions.

FAQ Series 17, FAQ No. 12
LR reference: Main Board Rules 3.25 / GEM Rules 5.34
Released on 19/12/2011 (Updated on 28/12/2018)

Question:

Are board resolutions sufficient for amending the terms of reference of an issuer’s audit and remuneration committees? Or are shareholder resolutions required?

Answer:

Board resolutions are sufficient for amending the terms of reference of an issuer’s audit and remuneration committees (and all other committees).

FAQ Series 17, FAQ No. 12A (Previously published in FAQ Series 21 No.5)
LR reference: Main Board Rules 3.22 and 3.26 / GEM Rules 5.29 and 5.35
Released on 27/3/2013 (Updated on 28/12/2018)

Question:

The new requirement to establish a nomination committee chaired by the chairman of the board or an INED and comprising a majority of INEDs becomes effective from 1 January 2022. What happens if an issuer fails to meet any of the requirements set out in the Rule on 1 January 2022?

Answer:

If the issuer fails to set up a nomination committee or has failed to meet any of the other requirements in the Rule on 1 January 2022, it must set up a nomination committee and/or appoint appropriate members to the nomination committee to meet the requirement(s) within three months.

From 1 April 2022, if the issuer fails to set up a nomination committee or at any time has failed to meet any of the other requirements in the Rule, it must immediately publish an announcement containing the relevant details and reasons. The issuer must set up a nomination committee and/or appoint appropriate members to the nomination committee to meet the requirement(s) within three months after failing to meet such requirement(s) (“Arrangement”). This is in line with the practice regarding the audit committee and remuneration committee. The issuer may select the current headline category “Miscellaneous – Other – Corporate Governance Related Matter” when submitting the announcement for publication on the HKEXnews website.

The Arrangement would also apply to issuers with a WVR structure in respect of the requirements relating to the establishment and composition of the nomination committee under Rules 8A.27 and 8A.28.

FAQ Series 17, FAQ No. 12B
LR reference: Main Board Rules 3.27A, 8A.27 and 8A.28 / GEM Rules 5.36A
Released on 01/01/2022

Question:

Does the Exchange provide any accreditation of professional training for company secretaries which could fulfil the requirement of this Rule?

Answer:

The Exchange does not generally provide accreditation of professional training courses although the Exchange considers The Hong Kong Chartered Governance Institute’s continuing professional development training (including their ECPD courses) satisfy the requirements of this Rule.

FAQ Series 17, FAQ No. 13
LR reference: Main Board Rules 3.29 / GEM Rules 5.15
Released on 19/12/2011 (Last updated on 01/01/2022)

Question:

Does an accountant or lawyer acting as an issuer's company secretary fulfil the requirement to attend relevant professional training each year by attending CPD courses on subjects such as litigation and accounting standards?

Answer:

We intend that the training should be broad rather than restrictive. Where legal and accounting courses are relevant to a company secretary’s role and duties, they should count towards the 15-hour training requirement.

FAQ Series 17, FAQ No. 13A
LR reference: Main Board Rules 3.29 / GEM Rules 5.15
Released on 19/12/2011 (Updated on 28/12/2018)

Question:

If a person is the company secretary of an issuer that is dual-listed on the Hong Kong and Shanghai stock exchanges and attends training courses relating to PRC listing requirements and regulations (to comply with Shanghai Stock Exchange requirements), do those courses count towards the 15-hour training requirement?

Answer:

As the company secretary of a Hong Kong issuer, this person should also undergo training on Hong Kong rules and regulations. However, the Exchange does not prescribe specific types of courses that a company secretary should attend, as long as they are relevant to their professional duties. If the training courses are of a general nature (e.g. a course on corporate governance), and not specifically on any PRC rules and regulations, then they may count towards the 15-hour training requirement.

FAQ Series 17, FAQ No. 13B
LR reference: Main Board Rules 3.29 / GEM Rules 5.15
Released on 19/12/2011 (Updated on 28/12/2018)