[Last updated: 1 January 2024, unless otherwise noted]

Listing Rules requirements

The GEM Listing Rules have a chapter and an appendix dedicated to corporate governance. In addition, various requirements relevant to corporate governance are contained throughout the GEM Listing Rules. There are four tiers of requirements:

Type A: Rules, which are the required standard of corporate governance mandatory for all issuers, breaches of the GEM Listing Rules may lead to sanctions.

Type B: Mandatory requirements for disclosure in an issuer’s corporate governance report, any failure to disclose will be regarded as a breach of the GEM Listing Rules.

Type C: Code provisions ("comply or explain" requirements), which an issuer is expected to comply with, but may deviate from if the issuer gives considered reasons for the deviation and explains how good corporate governance was achieved by means other than strict compliance with the code provision. The explanation should provide a clear rationale for the alternative actions, steps taken by the issuer and the impacts and outcome. Failure to provide considered reasons and an explanation in such manner will be regarded as a breach of the GEM Listing Rules. 

Type D: Recommended best practices, which an issuer is encouraged to adopt on a voluntary basis, but a failure to adopt does not require explanation

Type A regulations

The requirements which a company must comply with are relatively prescriptive. Examples include:

• Appointment of at least three independent non-executive directors (INED) and INEDs must represent at least one-third of the board. At least one of the INEDs must have appropriate professional qualifications or accounting or related financial management expertise.
• Appointment of at least one director of a different gender to the board.
• Professional qualification of a company secretary.
• Appointment of an audit committee and its composition.
• Appointment of a remuneration committee and its composition.
• Appointment of a nomination committee and its composition.
• Appointment of a compliance adviser. 

Type B, Type C and Type D regulations 

Type B, Type C and Type D regulations are mainly included in the Corporate Governance Code (CG Code). The CG Code sets out:

• The mandatory disclosure requirements for corporate governance reports in the areas of corporate governance practices, board of directors, chairperson and chief executives, board committees, company secretary, directors' securities transactions, risk management and internal control, auditor's remuneration, diversity, shareholders' rights, and investor relations.
• The principles of good governance and code provisions that deal with: corporate strategy, business model and culture; corporate governance functions; board composition, succession and evaluation; appointment, re-election and removal of directors; nomination committee; the responsibilities of directors; the roles and responsibilities of chairman and chief executive; management functions; board committees; conduct of board proceedings and supply of and access to information; company secretary; financial reporting; risk management and internal control; audit committee; the level and make-up of remuneration and disclosure; effective communication with shareholders; and shareholders meetings.
• The recommended best practices.

Corporate governance report

Issuers must include a corporate governance report prepared by the board of directors in their annual reports. The corporate governance report must include all the information required in the GEM Listing Rules, for example:

• The mandatory disclosure requirements for corporate governance reports.
• A narrative statement explaining how the issuer has applied the principles of good governance to enable shareholders’ evaluation of such application.
• A statement as to whether the issuer has complied with the code provisions.
• For any deviation from the code provisions (including adoption of any alternatives other than the code provisions), details of the deviation during the financial year (including the considered reasons and explanation).

Issuers must state in their interim reports whether they have complied with the code provisions for the period covered in their interim reports and provide the considered reasons and explanation for any deviation.

Environmental, Social and Governance (ESG) report

Issuers must publish their ESG reports on an annual basis and regarding the same period covered in their annual reports in accordance with the prescribed ESG reporting guide set out in the GEM Listing Rules. ESG reports may be presented as information in the issuer's annual report or in a separate report.  ESG report has to address two subject areas: environmental and social. Corporate governance is addressed separately in the CG Code.

The ESG reporting guide under the GEM Listing Rules comprises two levels of disclosure obligations: (a) mandatory disclosure requirements; and (b) "comply or explain" provisions. If a company deviates from the "comply or explain" provisions, it must give considered reasons in its ESG report.