NZX commences initial consultation on director independence policy 2023

  • Legal update

    16 May 2023

NZX commences initial consultation on director independence policy 2023 Desktop Image NZX commences initial consultation on director independence policy 2023 Mobile Image

NZX has released its consultation paper for round one of a two-part review of potential amendments to the director independence settings contained in the NZX Corporate Governance Code (Code) and NZX Listing Rules (Rules).

The NZX’s review will consist of two consultation rounds and will focus on exploring the purpose and rationale for the requirements of director independence. The initial consultation is in relation to the principles and concepts that underpin the director independence requirements. The subsequent round of consultation will be undertaken later in the year, which will include more detailed proposals and an exposure draft of potential changes to the Rules and Code for submitters’ consideration and feedback. Note that NZX is not considering changes to other operative Listing Rules (such as the capital raisings related party and major transaction requirements) as part of this review. 

The consultation for round one is available here: NZX Rules and Guidance Consultation - NZX, New Zealand’s Exchange.

The closing date for submissions is Friday, 9 June 2023.

Who is it for? 

This consultation and review is to ensure the settings give investors, and other stakeholders, further confidence that board independence settings are sufficient to protect the interests of all shareholders and the company. The revised director independence settings will need to be considered by all NZ listed issuers and its directors.

Matters consulted on

NZX is consulting on the following matters: 

  • Purpose of director independence requirements: to enable better articulation of the conflicts of interest that the settings seek to manage (including in relation to shareholder groups with competing interests such as majority and minority shareholders);
  • Benefits of director independence requirements: to ensure that the level of director independence is appropriately calibrated within board and board committee composition requirements;
  • Nature of director independence: the nature of the test for director independence and considerations relating to the assessment of director independence;
  • Board and audit composition: whether amendments should be made to the board and audit composition requirements contained in the Rules and recommendations contained in the Code; 
  • Settings of different categories of issuer: whether differential settings should apply to certain categories of issuer (for example those in the S&P/NZX 20 Index or S&P/NZX 50 Index);
  • Minority shareholder interests: whether changes are required in relation to the director independence settings to better manage the conflicts between majority and minority shareholders; and 
  • Disclosure of director independence: whether changes should be made to the requirements and recommendations relating to the reporting of a director’s independence status.

Consultation questions are included with the discussion of each of these proposals for interested parties to provide their views on. In addition, NZX welcomes submitters’ more general views relating to the director independence settings. 

Our team will be working through the consultation and making our own submissions. If you need assistance with your submissions or would like to discuss, feel free to reach out to one of our experts.

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