|Non-Executive Directors make up a majority of the Board.|
This Provision provides for the minimum proportion of Non-Executive Directors (NEDs) on the Board.
A key purpose of the Board is to provide oversight of management. This becomes difficult where it comprises a majority of management members (i.e. Executive Directors or EDs).
Provision 2.3 should also be read in conjunction with the following Listing Rules and Provisions:
- MR 210(5)(c) and CR 406(3)(c) specify that a Board must have at least two non-executive directors who are independent and free of any material business or financial connection with the issuer, and that IDs must comprise at least one-third of the issuer’s board and any vacancy must be filled within two months but in any case not later than three months. (Note that there is a transition period for the requirement for IDs to comprise at least one-third of the board, to take full effect only from 1 January 2022.)
- Provision 2.2 specifies that IDs should make up a majority of the Board where the Chairman is not independent. Note that Provision 2.3 is automatically complied with if Provision 2.2 is complied with.
B. Practice Guidance
C. Related Rules and Regulations
- Section 201B(2) of the Companies Act: Audit Committees [Composition].
- MR 210(5)(c) and CR 406(3)(c): Directors and Management.
- MR 720(1) and CR 720(1): Directors and Management.
D. CG Guides
- Board Guide 2.9: Independence [Board Composition].
- Board Guide 5.8: Types of Directors [Director Duties].
- Board Guide 5.10: The Non-Executive Director.
- NC Guide 3.4: Board Composition [Nomination and Appointment Process].
- NC Guide 4.1: Introduction [Director Independence].
- NC Guide 4.2: Number of IDs [Director Independence].
E. Related Articles
- “The search for independence” by Lim Chin Hu. (446KB)
- “Professionalising independent directorship” by Benedict Lim. (458KB)
- “The role and challenges of the non-executive board chair” by Lee Chong Kwee. (145KB)
- “Independent directors: Neither tigers nor pussy cats” by Anabelle Yip. (255KB)
- “Independent director recruitment: The new challenge” by SID. (258KB)
- “The idea of a ‘professional independent director’” by Umakanth Varottil. (130KB)
- “Will the truly independent director please stand up?” by Willie Cheng. (441KB)