The Hong Kong Corporate Governance Code: Appendix C1 requirements for listed issuers

Overview of the Hong Kong Corporate Governance Code 2025

The Hong Kong Corporate Governance Code is Appendix C1 to the Main Board Listing Rules and the GEM Listing Rules. It sets the governance framework for every issuer listed on the Stock Exchange of Hong Kong. The code operates on a three-tier structure: Mandatory Disclosure Requirements (must comply), Code Provisions (comply-or-explain), and Recommended Best Practices (voluntary but encouraged). An issuer may depart from a Code Provision if it explains the departure and the reasons for it. A Listing Rule, by contrast, must be complied with. The December 2024 consultation conclusions package took effect on 1 July 2025, applying to corporate governance reports and annual reports for financial years commencing on or after that date.

Appendix C1 HKEX Requirements

Appendix C1 contains the complete set of governance rules for listed issuers. It is divided into two lettered parts. Part 1 contains Mandatory Disclosure Requirements, which are Listing Rules that an issuer must comply with. Part 2 contains Code Provisions, subject to the comply-or-explain principle. Part 3 contains Recommended Best Practices. The appendix also includes an introduction explaining its application and the board's overarching responsibilities.

The mandatory disclosure requirements cover the corporate governance report, board composition, risk management and internal control, shareholder communication, and board diversity. The code provisions address board leadership, board composition and appointment, directors' remuneration, accountability and audit, and delegation by the board. The recommended best practices offer guidance on board independence and shareholder engagement.

Hong Kong Code Provisions Comply or Explain

The comply-or-explain mechanism is the core of Appendix C1. A code provision is not a Listing Rule. An issuer may depart from it if it discloses the departure and provides a reasoned explanation in its corporate governance report. The Exchange expects the explanation to be specific to the issuer's circumstances. A generic statement that the issuer considers the existing arrangement satisfactory does not meet the standard.

The code provisions cover board composition, including the board skills matrix at Code Provision B.1.5, director nomination and election, remuneration policy, accountability and audit including the risk management and internal control review, and delegation by the board to committees. Where an issuer chooses to depart, the corporate governance report must identify the code provision departed from, the reasons for departure, and, where the departure is temporary, the expected duration and the steps being taken to comply.

Corporate Governance Report Hong Kong

Every listed issuer must include a corporate governance report in its annual report. The report must address each mandatory disclosure requirement and each code provision, either stating compliance or explaining departure. The report follows the structure set out in the Mandatory Disclosure Requirements section of Appendix C1. It must cover the board's responsibility for governance, the board's composition, the directors' training and continuous professional development, the board's evaluation process, the nomination and remuneration policies, the risk management and internal control review, shareholder rights, and investor relations.

The report must also disclose the number of board meetings held and the attendance record of each director, the audit committee's work, and the company secretary's role and qualifications. For financial years commencing on or after 1 July 2025, the report must include the board skills matrix required by Code Provision B.1.5, the gender ratio of senior management and the workforce under Mandatory Disclosure Requirement paragraph J, and the whistleblowing policy under Code Provision D.2.3.

HKEX Mandatory Disclosure Requirements

The mandatory disclosure requirements are Listing Rules. An issuer must comply with them. There is no comply-or-explain option. These requirements are set out at the beginning of Appendix C1. They include the obligation to prepare and publish a corporate governance report in the annual report, to disclose the board's composition including the number and identity of independent non-executive directors, to disclose the board's role in risk management and internal control and confirm that a review of the effectiveness of those systems has been conducted, to disclose the issuer's shareholder communication policy, and to disclose the board's diversity policy and, from 1 July 2025, the gender ratio of senior management and the workforce.

A breach of a mandatory disclosure requirement is a breach of the Listing Rules and may result in disciplinary action by the Exchange, including a public censure or a requirement to rectify the breach. The Exchange may also impose a trading halt or suspension where the breach is material.

The Three-Tier Structure in Practice

The three-tier structure gives issuers flexibility while maintaining minimum standards. The mandatory disclosure requirements set the baseline. The code provisions set the expected standard, with the comply-or-explain mechanism allowing departure where the issuer has a valid reason. The recommended best practices are voluntary. Their adoption signals strong governance.

For a typical listed issuer, the practical impact is as follows. The issuer must comply with all mandatory disclosure requirements in the corporate governance report. For each code provision, the issuer must either comply or explain; the explanation must be specific and meaningful. For each recommended best practice, the issuer may choose to adopt or ignore it; there is no disclosure obligation for non-adoption.

Major Changes Effective July 2025

The December 2024 consultation conclusions introduced several changes that took effect on 1 July 2025, applying to financial years commencing on or after that date. The key changes are:

Independent non-executive director cap and long service limit. Rule 3.12A caps concurrent directorships of listed issuers at six. An independent non-executive director holding seven or more such directorships is an Overboarding INED. Rule 3.13A prohibits a board from including an independent non-executive director who has served for nine years or more, subject to a six-year transition period in two phases ending 1 July 2031. The cooling-off period before re-appointment is three years.

Board skills matrix. Code Provision B.1.5 requires the issuer to maintain and disclose a board skills matrix setting out the mix of skills the board currently has, how that combination serves the issuer's purpose and strategy, and any skills the board is seeking.

Workforce diversity. Rule 13.92(1) requires a workforce diversity policy. Mandatory Disclosure Requirement paragraph J requires separate disclosure of the gender ratio of senior management and the workforce.

Whistleblowing policy. Code Provision D.2.3 provides that the issuer should establish a whistleblowing policy and system for employees and those who deal with the issuer, such as customers and suppliers, to raise concerns in confidence and anonymity with the audit committee or a designated committee. This provision was upgraded from a Recommended Best Practice to a Code Provision on 1 January 2022 and renumbered from D.2.6 to D.2.3 with effect from 1 July 2025.

Anti-corruption policy. Code Provision D.2.4 provides that the issuer should establish policies and systems that promote and support anti-corruption laws and regulations. This provision was also upgraded and renumbered alongside D.2.3.

Board Composition and the Company Secretary

Board composition is a central theme of Appendix C1. The board must include at least three independent non-executive directors, and independent non-executive directors must represent at least one-third of the board. The nine-year cap on long service and the six-directorship cap are now in force. The nomination committee, which must be chaired by an independent non-executive director or the board chair, oversees board composition and succession planning.

The company secretary plays a central role in governance. The statutory duties under the Companies Ordinance (Cap. 622) are filings, registers and meetings. The governance role under Appendix C1 is advising the board on process, independence and disclosure; ensuring good information flow within the board; and ensuring that board policy and procedures are followed. The corporate governance report must identify the company secretary and confirm that the secretary has the necessary qualifications and experience.

Shareholder Communication

Code Provision F.1.1 provides that the issuer should have a shareholder communication policy. The mandatory disclosure requirements at paragraph L require the issuer to disclose the policy in the corporate governance report and to describe how it ensures effective communication with shareholders. The policy should cover the means by which shareholders can contact the board, the timing and content of shareholder meetings, and the use of electronic communication.

The issuer must also disclose the number of shareholder meetings held during the financial year, the attendance record of directors at those meetings, and the steps taken to encourage shareholder participation. From 1 July 2025, the policy should also address how the issuer communicates its governance practices to shareholders, including the board skills matrix and the workforce diversity policy.

Risk Management and Internal Control

Appendix C1 places responsibility for the issuer's risk management and internal control systems on the board. The mandatory disclosure requirements at paragraph N require the board to confirm that it has conducted a review of the effectiveness of those systems at least annually. The review must be conducted through the audit committee or a separate risk committee. The corporate governance report must state that such a review has been conducted and describe its scope.

The board's role is oversight of the systems, not day-to-day operation of controls. That is management's responsibility. The report must also disclose the issuer's policy on risk management, the key risks identified, and the steps taken to mitigate them.

The ESG Reporting Code and Climate Disclosures

Appendix C2 is the ESG Reporting Code. Part D contains climate-related disclosure requirements modelled on IFRS S2, effective 1 January 2025. Scope 1 and Scope 2 greenhouse gas emissions disclosure is mandatory for all Main Board and GEM issuers for financial years commencing on or after 1 January 2025. For LargeCap Issuers, the rest of Part D is mandatory for financial years commencing on or after 1 January 2026. For other Main Board issuers, the rest of Part D is on a comply-or-explain basis. For GEM issuers, the rest of Part D is voluntary.

Where to Find Further Detail

Each of the topics summarised above is addressed in a dedicated spoke page. For the independent non-executive director cap and long service limit, see the INED page. For board evaluation, see the board evaluation page. For board diversity, including the single-gender board ban and workforce diversity policy, see the board diversity page. For climate-related disclosures, see the ESG reporting page. For risk management and internal control, see the risk management page. For whistleblowing policy and statutory whistleblower protection, see the whistleblowing page. For anti-bribery requirements under the Prevention of Bribery Ordinance (Cap. 201), see the anti-bribery page. For the governance framework applicable to public bodies, statutory bodies, subvented organisations and companies limited by guarantee, see the public governance page.