Below are key takeaways from ISS’ recently released Hong Kong 2021 Proxy Season Review. The full report is available to institutional subscribers by logging into ProxyExchange then selecting the Governance Exchange and its Report Center tab and to corporate subscribers by logging into Governance Analytics then selecting the Governance Exchange and the Report Center tab.
- Number of Meetings Covered: The distribution of Hong Kong meetings covered by ISS between May and June of this year was more balanced across the two months as compared to the same months last year. The number of M&A-related proposals increased by more than 250 percent from 102 in the first half of 2020 to 371 in the first half of 2021. A sizeable amount of increase was also observed in non-routine share issuance proposals from 651 in the first half of 2020 to 873 in the first half of 2021.
- Gender Diversity: Lack of gender diversity on boards continues to be a concern in the market. The proposed amendments to the Hong Kong Listing Rules aim to improve better disclosure requirements for companies as well as requiring all companies to have at least one female director in order to achieve a minimum level of diversity.
- China Share Incentive Schemes: The distinction between a share awards scheme and a share purchase plan by Hong Kong-listed Chinese companies has become less apparent due to more similarities in their key features.
- Review of Hong Kong Corporate Governance Code: Proposed amendments to the Hong Kong Corporate Governance Code are designed to achieve long-term effectiveness in the areas of corporate culture, board diversity and independence, and shareholder communication.
- Main Board Listing Profit Requirement: The minimum profit requirement for companies seeking to be listed in the Main Board of The Stock Exchange of Hong Kong Ltd. (SEHK) will increase by 60 percent from a total of HKD 50 million for the three financial years preceding the listing to a total of HKD 80 million for the three financial years preceding the listing. The increase is part of the continuous effort by the SEHK to enhance its market quality and reputation. This new requirement is designed to curtail the manufacturing of listed shell companies.
- Revised Disciplinary Rules: The revised disciplinary rules for companies would remove the evidential challenges under the existing disciplinary rules, compel companies to take action on individuals who have committed misconduct or breached the Hong Kong Listing Rules, and require companies to provide the investing public with information on the director/s or senior management member/s who have been subjected to disciplinary action/s.
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By Danielle Bianca Yalong, Johann Jin Chan, Lorenzo Montecillo