Final amendments to the NZX Corporate Governance Code 2023

  • Legal update

    08 March 2023

Final amendments to the NZX Corporate Governance Code 2023 Desktop Image Final amendments to the NZX Corporate Governance Code 2023 Mobile Image

NZX has announced its final amendments to the NZX Corporate Governance Code (Code) following its two-phased consultation and review. NZX has also released the related amendments to the NZX Listing Rules (Listing Rules) and ESG Guidance Note (ESG Note). In addition, the NZX Diversity Guidance Note and NZX Governance Guidance Note have been revised to conform with the amendments resulting from the Code review. 

We set out below, an updated summary of the finalised changes to the Code (a mark-up version of the Code is linked here). 

Reporting against the Code

These amendments will become effective on 1 April 2023 and final versions of each document will be made available once they become effective on the NZX Rules and Guidance webpage. 

In respect of financial years commencing on or after 1 April 2023, issuers must report against the amended Code (dated 1 April 2023). 

In respect of financial years commencing before 1 April 2023, issuers must either continue to report against the previous version of the Code (dated 17 June 2022), or elect to voluntarily report against the amended Code, dated 1 April 2023. Issuers should clarify which version of the Code they are reporting against. 

It will be important for Boards and management to be across these changes holistically to work out what it means for them and their disclosure framework. 

Code framework

While the “comply or explain” framework will be retained, NZX has provided further guidance in the Code as to how non-adoption of a recommendation should be reported, and to encourage issuers to consider providing an index or use subheadings to ensure that readers of the issuer’s corporate governance statement can easily navigate disclosures in relation to the recommendations. 

NZX has amended Rule 3.8.1(b) of the Listing Rules to ensure that ‘explain’ disclosures are provided for past reporting periods where an issuer has failed to explain a different approach in the most recent past reporting period.

See below for a detailed outline of the framework:

Principle one: Ethics 
Topic Summary of proposed change
Commentary to recommendation 1.1
  • Expecting issuers to provide training to staff in relation to its code of ethics at least every three years. An issuer may wish to tailor its training in accordance with difference sectors of its workforce.

  • Reinforcing NZX’s expectations around disclosure relating to the frequency of training in relation to its code of ethics and that any disclosure should be included as part of an issuer’s corporate governance disclosures (under Rule 3.8.1 of the Listing Rules). 
Commentary to recommendation 1.1
  • Suggesting that issuers consider whether it is appropriate to provide access to an external agency for whistleblowing purposes and to note that issuers should ensure they understand their legislative requirements in relation to protected disclosures.

Principle two: Board composition and performance
Topic Summary of proposed change
Director independence
New recommendation as part of recommendation 2.4
  • Issuers should disclose the Board’s assessment of director independence, including when a director is determined to be independent despite the presence of one of the factors identified in the Code for a director being non-independent. This is consistent with the approach taken in Australia.
Commentary to recommendation 2.4
  • Recognising that non-independent directors may continue to provide valuable service to the board of an issuer but that the issuer should ensure that appropriate conflict management arrangements are in place to manage the relationship or circumstance that has given rise to the director being considered not to be independent. 
  • Clarifying that the listed factors that may affect director independence are not intended to act as an exhaustive list of factors to consider when assessing a director’s independence. Instead, the board should make a holistic assessment of a director’s independence, which aligns with the approach taken under the ASX Code.
Table under Recommendation 2.4
  • Including a new factor in relation to close family ties, to refer to close personal relationships which includes business or social connections reflecting that these relationships can also affect a director’s independence. This inclusion is aligned with the approach taken in Australia. NZX considers that examples of relationships that may fall within this factor would include those with immediate family members, current business partners, and those with persons with whom the director has an extensive or ongoing business arrangement (such as the provision of consultancy services).
  • Including a new factor referring to whether the director is currently deriving, or within the last 12 months derived a substantial portion of his, her or their annual revenue from the issuer.
  • Making technical amendments to the drafting of some of the factors as inclusive considerations including changes to the length of time within which previous relationships with an external audit firm are relevant (increasing it from 12 months to 3 years).
  • Clarifying that where a director’s tenure exceeds 12 years, the director’s tenure may be a factor that precludes the director from being regarded as independent. This change has also been included in the Code commentary. The commentary also reinforces that under recommendation 2.8, a majority of the board should be comprised of independent directors.
Board composition
Commentary to recommendation 2.4
  • Including in a director’s profile, attendance at any board committee meetings of which the director is a member in accordance with recommendation 3.5.
  • Noting the value of issuers providing information regarding the succession planning arrangements for the board, particularly where there are long tenured directors.
New recommendation 2.10
  • Splitting recommendation 2.9. Now it only recommends that the Chair is an Independent Director. Recommendation 2.10 recommends that the chair of the board and the CEO should be different people. This amendment is consistent with ASX, SGX and the UK Financial Reporting Council. 
Commentary to recommendation 2.5
  • Encouraging issuers to consider diversity factors beyond gender such as factors including ethnicity, cultural background, sexual orientation, skills and age when designing their diversity policies and practices in light of the issuer’s size, product or service offering, customer base and the jurisdictions in which it operates. The amendment will also note the importance of fostering a culture of inclusion to enable the delivery of diversity goals.
  • Issuers (particularly an issuer within the S&P/NZX 50 Index with more than 50 employees) may wish to provide gender pay gap information either on its website or in its annual report.
Recommendation 2.5
  • Recommending that where an issuer is in the S&P/NZX 20 Index at the commencement of the reporting period, it should have a minimum measurable objective of at least 30% male and at least 30% female directors on its board within a specified period. This is consistent with changes made to the ASX Code in 2019, in relation to S&P/ASX 300 Index issuers.
Principle three: Board committees
Topic Summary of proposed change

Audit committees

Commentary to recommendation 3.1
  • Issuers should disclose the qualifications and experience of audit committee members. This is similar to the approach in Australia.

Remuneration committees

Commentary to recommendation 3.3
  • Noting that it will be preferrable for issuers not to allow executive directors to sit on an issuer’s remuneration committee, given the conflicts inherent in the relationship. Where the issuer elects to appoint an executive director to its remuneration committee, robust conflict management arrangements should be put in place. Further, the executive director should not participate in the consideration of their own remuneration. 

Takeover committees

Commentary to recommendation 3.6
  • Recommending that issuers should disclose the composition of its takeover committee and the committee’s independence of the bidder, once the committee has been established, and the takeover bid is made public. 
Principle four: Reporting and disclosure, and NZX ESG guidance note
Principle four
Topic Summary of proposed change

Financial and non-financial reporting

Recommendation 4.3 and 4.4
  • Splitting recommendation 4.3 so that the Code contains bespoke recommendations relating to financial and non-financial reporting, to increase the prominence of the Code’s endorsement of non-financial reporting (now under recommendation 4.4).

Location for ESG reporting

Commentary to recommendation 4.4
  • Unless included in the annual report directly as part of the corporate governance reporting, it may also be presented as a standalone report a link to which is included in the annual report. Where the corporate governance reporting is by way of the website, the annual report should provide a link to where this is. 
Non-financial disclosures
Commentary to recommendation 4.4
  • Expanding commentary to encourage issuers to report the process by which an issuer has ensured that its non-financial reporting disclosures are materially accurate and provide an appropriate level of information for investors, to the extent that an external auditor has not reviewed or audited its non-financial reporting. This reflects amendments made by ASX to the ASX Code. NZX will not be prescribing any particular process for the preparation of non-financial information.

Climate-related disclosures

Commentary to recommendation 4.4
  • Updating commentary to reflect the Financial Sector (Climate-related Disclosures and Other Matters) Amendment Act (CRD regime) that requires mandatory reporting by climate reporting entities including NZX issuers (other than small listed issuers).
NZX ESG Guidance Note
Topic Summary of proposed change

Preparation process for ESG disclosures

  • Consequential amendments to the ESG Note as a result of the amendment to the commentary of recommendation 4.4 to reflect the importance of an issuer providing disclosures as to the process by which the issuer has ensured that its non-financial reporting disclosures are materially accurate and provide an appropriate level of information for investors, where an external auditor has not reviewed or audited its non-financial reporting.

Risk management

  • Encouraging issuers to consider reporting the material ESG risks faced by their business, how they intend to manage ESG risks, and the risk management framework that they use to identify, monitor and manage those risks.

Climate-related disclosures

  • Updating the ESG Note with reference to the CRD regime and providing additional material such as identifying key aspects of the regime and where issuers can find more information to support affected issuers in becoming familiar with the new reporting requirements and transitioning to the new regime.
  • Clarifying that NZX does not expect issuers to apply the TCFD framework in addition to the CRD Regime and noting that the TCFD may be a useful framework for issuers who are not captured by the CRD regime to voluntarily report against.

Flexibility in relation to reporting frameworks

  • Clarifying that the ESG Note is not intended to create any additional obligations or expectation in relation to ESG reporting from those which exist under the Listing Rules, the Code and legislation.
  • Noting that NZX does not regard any framework as mutually exclusive and an issuer may wish to adopt particular aspects of different frameworks.
  • Encouraging issuers to adopt a recognised global reporting framework for ESG reporting, however issuers may choose to adopt an alternative global ESG reporting framework, or part of a global framework or frameworks. 
  • Encouraging issuers to clearly outline the framework that the issuer has elected to adopt.

Additional frameworks

  • Referring to the ‘B Corp Certification’ rather than the UN Global Compact, as one of the major frameworks that issuers may wish to consider reporting against.
  • Referring to the work being conducted by the International Sustainability Standards Board (ISSB) which is in the process of developing global sustainability-related disclosure standards.
  • Referring to the GRESB Benchmark which may be of relevance to issuers in the property sector.
  • Removing references to the IIRC, SASB and CDP as they have been absorbed into the ISSB.

Green bonds

  • Removing the section relating to green bonds, given this section of the ESG Note is now outdated and the FMA has published guidance in relation to its disclosure expectations in respect of green bonds.

*There will be no amendments to the Code at this time in relation to modern slavery reporting as MBIE has commenced a consultation in relation to new legislation designed to address modern slavery and worker exploitation.

Principle five: Remuneration
Topic Summary of proposed change

Non-financial goals when setting executive performance-based remuneration

Commentary to recommendation 5.2
  • Expanding considerations when setting performance-based remuneration for executives to include considerations of non-financial goals that are integral to its strategy, and the values of the issuer.
  • Encouraging issuers to disclose how its executive remuneration arrangements align with its strategy and performance objectives, and generic eligibility and vesting hurdles for any long term incentive scheme that forms part of those arrangements. The disclosure need not disclose precise details of targets, so long as sufficient information is provided as to the type of performance hurdles that applies (e.g. it is based on shareholder return, operational performance or qualitative factors).

Independent advice

Commentary to recommendation 5.1
  • Where an issuer has relied on an independent remuneration report in formulating its director remuneration arrangements, the issuer should disclose a summary of the report, to support greater disclosure in this area (even if an issuer would not otherwise disclose reliance on an independent remuneration consultant).

Directors and executives

Recommendations 5.1 and 5.2 and the associated commentary
  • Drafting changes to recommendations 5.1 and 5.2, and the associated commentary to clarify the recommendation and commentary that apply to director and executive remuneration respectively.
Principle six: Risk management framework
Topic Summary of proposed change


Commentary to recommendation 6.1
  • Adding that an issuer should report a summary of its risk management framework to provide more clarity on how the issuer has identified the material risks to its business.
Principle seven: Internal audit
Topic Summary of proposed change

Internal audit function

Commentary to recommendation 7.3
  • Including a description of the role and purpose of the internal audit function as it is generally not well understood.
Principle eight: Shareholder meetings
Topic Summary of proposed change

Hybrid vs physical meetings


Recommendation 8.2
  • Updating the recommendation to refer to issuers designing their shareholder meeting arrangements to encourage shareholder participation. 
Commentary to recommendation 8.2
  • Encouraging issuers, particularly those in the S&P/NZX 50 Index, or those with geographically diverse registers to facilitate hybrid meetings.
  • Clarifying when virtual only or physical only meetings may be appropriate.

Virtual meeting guidance

Commentary to recommendation 8.2
  • Providing additional guidance as to how issuers can assist investors in understanding and participating in the virtual aspects of meetings.

This article was co-authored by Ronnie Duan, a Solicitor in our Corporate team.