eGuide to CG Code

Non-Executive Directors make up a majority of the Board.


A. Explanation

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).

For that reason, this Provision states that NEDs, whether independent (i.e. Independent Directors or IDs) or not (i.e. Non-Executive Directors NEDs or NI-NEDs), should form a majority of the Board.

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



eGuide to CG Code
Definition of Corporate Governance
History and Structure of the Code
Role of the Board
Role of the Chair
Focus on Long Term and Sustainability
Revised Code Structure and Approach
Mandatory Principles
Provisions and Variations
Thoughtful and Meaningful Application
Board Matters
Principle 1
Provision 1.1
Provision 1.2
Provision 1.3
Provision 1.4
Provision 1.5
Provision 1.6
Provision 1.7
Principle 2
Provision 2.1
Provision 2.2
Provision 2.3
Provision 2.4
Provision 2.5
Principle 3
Provision 3.1
Provision 3.2
Provision 3.3
Principle 4
Provision 4.1
Provision 4.2
Provision 4.3
Provision 4.4
Provision 4.5
Principle 5
Provision 5.1
Provision 5.2
Provision 5.3
Remuneration Matters
Principle 6
Provision 6.1
Provision 6.2
Provision 6.3
Provision 6.4
Principle 7
Provision 7.1
Provision 7.2
Provision 7.3
Principle 8
Provision 8.1
Provision 8.2
Provision 8.3
Accountability and Audit
Principle 9
Provision 9.1
Provision 9.2
Principle 10
Provision 10.1
Provision 10.2
Provision 10.3
Provision 10.4
Provision 10.5
Shareholder Rights and Responsibilities
Principle 11
Provision 11.1
Provision 11.2
Provision 11.3
Provision 11.4
Provision 11.5
Provision 11.6
Principle 12
Provision 12.1
Provision 12.2
Provision 12.3
Managing Stakeholder Relationships
Principle 13
Provision 13.1
Provision 13.2
Provision 13.3
Practice Guidance
Board Roles and Director Duties
Board Composition and Guidance
Chairman and CEO
Board Membership
Board Performance
Procedures for Developing Remuneration Policies
Level and Mix of Remuneration
Disclosure on Remuneration
Risk Management and Internal Controls
Audit Committee
Shareholder Rights and Engagement
Engagement with Shareholders
Managing Stakeholder Relationships
eGuide Glossary

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