Independent non-executive directors in Hong Kong: appointment, tenure and the new rules

Independent Non-Executive Directors Hong Kong: Rules and Limits 2025

The rules governing independent non-executive directors Hong Kong changed on 1 July 2025. For directors and company secretaries, the question is what hard limits now apply to tenure and concurrent directorships under the HKEX Listing Rules. The answer: a nine-year service cap, a six-directorship ceiling, and a phased transition that leaves no room for the comply-or-explain escape that applies to code provisions.

The changes come from the December 2024 consultation conclusions package, which took effect on 1 July 2025 for financial years commencing on or after that date. The two most important provisions are Rule 3.13A (the nine-year cap) and Rule 3.12A (the directorship cap). Both are Listing Rules. They must be complied with.

The Nine-Year Cap on Long-Serving INEDs

Rule 3.13A, effective 1 July 2025, states that a board must not include an independent non-executive director who has served for nine years or more. The counting period runs to the conclusion of the annual general meeting following the end of that nine-year tenure. Such a director is classified as a Long Serving INED.

The rule does not apply to secondary-listed overseas issuers under Rule 19C.11. For every other listed issuer it is mandatory.

The Two-Phase Transition

The transition operates over six years in two phases.

• Phase 1 - by 1 July 2028: By the conclusion of the first annual general meeting held on or after 1 July 2028, Long Serving INEDs must not represent a majority of the issuer's independent non-executive directors.
• Phase 2 - by 1 July 2031: By the conclusion of the first annual general meeting held on or after 1 July 2031, the board must not include any Long Serving INED.

An issuer with a majority of long-serving INEDs as at 1 July 2025 must plan the replacement now. The transition period does not permit an issuer to retain all of them until the final deadline.

Cooling-Off Period and Re-Appointment

A former Long Serving INED may be re-appointed after a cooling-off period of three years. The re-appointment is permitted only if the director satisfies the independence factors in Rule 3.13 and has not been a director of the issuer, its holding company, any of their subsidiaries or any core connected person during the three years before re-appointment.

This cooling-off path is not a loophole. The three-year complete break from the group is a genuine disqualification period for most candidates.

The Directorship Cap: Six Directorships Maximum

Rule 3.12A, effective 1 July 2025, provides that an independent non-executive director must not concurrently hold more than six directorships of issuers listed on the Main Board or GEM of the Exchange. An Overboarding INED is one holding seven or more such directorships.

Transition for Existing Issuers

Existing issuers have a three-year transition. An independent non-executive director who is over the cap as at 30 June 2028 must comply by the conclusion of the earliest annual general meeting held on or after 1 July 2028 by any of the issuers concerned. If a director sits on the boards of seven listed issuers, all seven must have their AGM compliance deadlines aligned to the earliest one.

New Listing Applicants

For listings from 1 July 2025, a new listing applicant must have no Overboarding INED on its board on listing. Verify each proposed INED's current directorships before submission.

How the Independence Assessment Works

Rule 3.13 sets out the factors the Exchange considers in assessing independence. The nine-year cap and the six-directorship ceiling do not replace this assessment. They add to it. An INED who has served for eight years is still subject to the full Rule 3.13 evaluation. The Exchange may also require additional disclosure where a director holds significant cross-directorships or has a history of long service.

The Board Skills Matrix and the Nomination Committee

Code Provision B.1.5, effective 1 July 2025, applies on a comply-or-explain basis. The issuer should maintain and disclose in its corporate governance report a board skills matrix setting out the mix of skills the board currently has, how that combination of skills, experience and diversity serves the issuer's purpose, values, strategy and desired culture, and, where applicable, further skills the board is seeking, the plans to acquire them, and progress against the previous year's plans.

The nomination committee plays a central role. When an issuer needs to replace a Long Serving INED or an Overboarding INED, the skills matrix should guide the search. The committee should also consider the professional qualifications required under Rule 3.10, which requires at least one INED to have appropriate professional qualifications or accounting or related financial management expertise.

The One-Third Board Requirement

Rule 3.10A requires independent non-executive directors to represent at least one-third of the board. Rule 3.10 requires every listed issuer's board to include at least three independent non-executive directors. These two rules work together. A board of six would need three INEDs to meet the one-third test. A board of nine would need three INEDs under Rule 3.10 but four to reach one-third.

An issuer that loses a Long Serving INED and cannot immediately find a replacement must check whether it still satisfies both Rule 3.10 and Rule 3.10A. If it falls below, it must appoint a replacement within the Exchange's customary timeframe or face a Listing Rule breach.

What the Listing Rules Do Not Cover

The nine-year cap and the six-directorship ceiling are Listing Rules, not code provisions. There is no comply-or-explain alternative. An issuer that chooses to keep a Long Serving INED beyond the transition deadline is in breach of the Listing Rules, and the Exchange may impose sanctions.

The rules do not apply to secondary-listed overseas issuers under Rule 19C.11. For all other listed issuers, the hard limits are in effect from 1 July 2025, with the phased transition running to 2031.

Practical Steps for Directors and Company Secretaries

1. Audit existing INED tenure. Identify any Long Serving INED whose service will reach nine years before the 2028 or 2031 deadlines.
2. Count concurrent directorships. Check each INED's current directorships of Main Board and GEM issuers. Any director holding six or more is at the cap. Seven or more is Overboarding.
3. Plan the replacement timeline. For Long Serving INEDs, the 2028 phase removes the majority and the 2031 phase removes all. A succession plan should be in place now, not in 2027.
4. Update the board skills matrix. Under Code Provision B.1.5, the skills matrix should be disclosed in the corporate governance report. Use it to identify the skills needed in new INEDs.
5. Check the audit committee. The audit committee must be composed entirely of independent non-executive directors. A shortage of INEDs may also affect the audit committee's composition.

Summary of Key Dates

Requirement	Deadline
Rule 3.13A: Long Serving INEDs must not be a majority on the board	First AGM on or after 1 July 2028
Rule 3.13A: No Long Serving INEDs on the board	First AGM on or after 1 July 2031
Rule 3.12A: Overboarding INEDs must comply with six-directorship cap	First AGM on or after 1 July 2028
Cooling-off period before re-appointment of former Long Serving INED	Three years

The rules are clear and carry no comply-or-explain escape. Begin the compliance review now.