Report on Improving Corporate Governance in Hong Kong

Оригинал на английском языке.
Гонконгский институт лицензированных публичных бухгалтеров
Hong Kong Institute of Certified Public Accountants
Авторы: Syren Johnstone и Say H Goo
Обзор текущего состояния (дата издания отчета 15.12.2017) корпоративного права Гонконга, основанного на Ординансе "О компаниях" 2014 года (Hong Kong Companies Ordinance) и Ординансе "О ценных бумагах и фьючерсах" 2003 года (Hong Kong Securities and Futures Ordinance). Исследование недостатков действующего режима и предложения о направлениях развития.

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Четверг, 30 мая 2019

4. Recommendations. 4.2 Independent directors

A 4.2.1 Sufficient INED time

Amend the CG Code.

Recommendation level

Topic addressed
The proper undertaking of INED duties requires a recognition of the time required to undertake the same.

Details of recommendation
1. The CG Code to include a comply or explain provision that issuers should adopt a policy on the number of INED posts that can be held by an individual at any one time.
2. The policy to be made publicly available, such as on the issuer's website.
3. Deviations from the policy, where one has been adopted, are to be explained in the Corporate Governance Report, including as to why the INED's other posts will not affect the ability to properly and fully undertake the INED responsibilities.
4. The other posts of each INED must be disclosed in the Corporate Governance Report.

Attendant considerations
The Hong Kong Exchanges and Clearing Limited (HKEX) did a market consultation on this in 2010-2011, however, evidence suggests that the responses may be self-serving and not in the best interests of the market.
The recent HKEX consultation (2017) proposes that only posts in excess of six require further disclosures (see the discussion in Section 3).

Jurisdiction references
United States (New York Stock Exchange LLC (NYSE)). Mainland China.

Section 3 reference
3.7.11 Requirements relating to INEDs.

A 4.2.2 Basis of INED remuneration

Step required
Amend CG Code B.1.2(d) and L.

Recommendation level

Topic addressed
Promoting transparency and disclosure of the basis on which INEDs are remunerated.

Details of recommendation
1.CG Code B.1.2(d) to require the board to consider the linkage between the level of an INED's remuneration and their expected commitment and responsibilities.
2.CG Code L to require an appropriate disclosure cum explanation in relation to the foregoing (1 above) to be made in the Corporate Governance Report.

Attendant considerations
The required disclosure would be subject section 384(3) of the SFO if recommendation A4.5.1 «Legal status of CG-related disclosures» were implemented.

Jurisdiction references

Section 3 reference
3.4.3 Remuneration.
See also:
3.7.10 Requirements relating to INED performance.

A 4.2.3 INED training

Step required
Amend CG Code.

Recommendation level

Topic addressed
To enhance INEDs' capability and performance.

Details of recommendation
1. CG Code to impose continuous professional training requirements based on certification of attendance, not exam based.
2.INEDs should be exposed to CG training that is specialized to their role.
3.The SEHK to set out examples of the types of CG training or experiences it regards as acceptable.
4.Issuers will be free to commercially determine what training constitutes an INED CG training experience. (With reference to C4.2.4 «NED Code and INED reporting», this should be incorporated within the issuer's NED Code.)
5.CPT must be satisfied on an annual basis and reported to the SEHK. Issuers should be encouraged to disclose the same details on their websites.
6.Issuers only need to make disclosure to shareholders if a director has not satisfied the CPT requirement.

Attendant considerations
The new requirement should be reviewed after 2 years with a view to further development.
To determine the number of hours required - based on the HKEX 2010/2011 consultation 8 hours is suggested.

Jurisdiction references
UK (Walker and Turner Reviews). Mainland China.

Section 3 reference
3.7.11 INED qualifications.

C 4.2.4 NED Code and INED reporting

Step required
Amend the CG Code.

Recommendation level

Topic addressed
The public framework of responsibility and accountability of NEDs including INEDs.
To improve the responsibility of NEDs, particularly INEDs.
To improve the perception of legal responsibilities for INEDs through the increased visibility resulting from mandated disclosures.

Details of recommendation
1.CG Code to include a comply or explain Code Provision that an issuer should adopt an NED Code that specifies its policies, practices and expectations in respect of INEDs and other NEDs that is designed to facilitate the effectiveness of these NED roles.
2.A Model NED Code to be annexed to the CG Code that an issuer may choose to comply with, or alternatively establish their own NED Code. The Model NED Code to address, inter alia, the NED's expected involvement, sufficiency of a NED's time, basis of remuneration, and knowledge of the business and training, etc.
3.CG Code to impose mandatory reporting by INEDs in the Corporate Governance Report.
4.The matters to be reported to be specified but should include
-a summary of the INEDs' activities relating to the undertaking of their role over the course of the year;
-a statement as to the effectiveness of the issuer's INED Code and any changes that have been made to it over the year to improve its effectiveness (where a code has been adopted).
5.The listing rules will set out a model INED Code that establish the minimum set of topics required and/or recommended to be covered (see suggested details in Section 3.7.10).

Attendant considerations
The scope of matters to be reported on to be explored further.
Requirements in relation to the preparation and drafting of the INED report, particularly as regards its submission to the board for inclusion in the annual report, to be explored further.
The scope of matters that should be covered by the INED Code to be explored further.

Jurisdiction references
Mainland China. UK.
United States.

Section 3 reference
3.7.10 Requirements relating to INEDs.
See also:
3.3.4 Audit committee and A4.1.3 «Disclosures of the audit committee»

No recommendation
Special appointment mechanism for independent directors

Issue considered
Whether independent shareholders should appoint independent directors to guarantee their independence.

Based on a review of the experiences in the jurisdictions studied, particularly the quite divergent experiences and approaches in the UK and the United States when considered in view of the circumstances in Hong Kong, the arguments for and against introducing special voting arrangements for the appointment of independent directors are largely equivocal. Because imposing regulations that establish a different set of voting rights for shareholders based on their independence represents a public law override of the private law rights that would otherwise attach to the shares, it is suggested that in the absence of a clear mandate to impose such an override no such regulation should be imposed.

Section 3 reference
3.5.1 Voting rights generally.


Содержание отчета

Executive summary
Executive Summary I Key Findings
Executive Summary II Summary of Recommendations
Executive Summary III Approach to the Study
Executive Summary IV Abridged Text of the Analysis

1 Introduction to the study and its purposes
1.1 Purpose of this Report
1.2 The development of CG in Hong Kong
1.2.1 Domestic drivers
1.2.2 Global drivers
1.3 Structure of this Report
1.3 Structure of this Report
1.3.1 Methodology
1.3.2 Analysis
1.3.3 Recommendations
1.4 Scope and limitations of this Report
1.5 Next steps

2 Methodology
2.1 Scope
2.1.1 CG concepts
2.1.2 CG Geographic reach
2.1.3 CG mechanisms
2.2 Work process
2.2.1 Data collection
2.2.2 Initial data organization
2.2.3 Oral evidence
2.2.4 Parity check
2.2.5 Analysis
2.2.6 recommendations

3 Discussion and analysis of jurisdictions studied
3.1 Overarching considerations
3.1.1 Thematic topics
3.1.2 Trends in regulating CG standards
3.1.3 The role of culture
3.1.4 The methodology of assessment
3.1.5 Cost-benefit considerations
3.1.6 Maintaining competitiveness
3.1.7 Effectiveness
3.2 Non-locally incorporated companies
3.2.1 Application of local laws and regulations
3.2.2 Cross border enforcement and cooperation
3.3 Information
3.3.1 Legal status of CG disclosures
3.3.2 Disclosure of listing rule compliance
3.3.3 Board evaluation
3.3.4 Audit committee
3.4 Involvement
3.4.1 Shareholder stewardship
3.4.2 Shareholder votes
3.4.3 Remuneration
3.4.4 Changes of control
3.5 Equality
3.5.1 Voting rights generally
3.5.2 Weighted voting rights
3.6 Accountability
3.6.1 Information disclosures generally
3.6.2 Listing rules
3.6.3 Board refreshment
3.6.4 Appointment of independent directors
3.7 Effectiveness
Part A - CG system design
3.7.1 Impact of regulatory design
3.7.2 Policy development agencies
3.7.3 Enforcement agencies
3.7.4 Audits of public companies
3.7.5 Duties of directors
3.7.6 Role of fiduciary law
Part B - Specific actions
3.7.7 Differentiation of CG requirements
3.7.8 Listing regime standards upon entry
Part C - Independent directors
3.7.9 Determination of independence
3.7.10 Requirements relating to INED performance
3.7.12 Empowerment of INEDs - controlling shareholders
Part D - Other items
3.7.13 Whistle-blowing
3.8 Coda

4 Recommendations
Introduction and approach to the recommendations
Part A - The board
4.1 Processes
4.2 Independent directors
4.3 CG standards
Part B - Enforcement
4.4 Shareholders
4.5 CG disclosures
4.6 Regulators
4.7 Ex ante mechanisms
Part C - Architecture and policy
4.8 Architecture
4.9 Policy
4.10 Summary tables

5 Concluding remarks
5.1 The Recommendations
5.2 The Hong Kong market

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