It concerns all listed companies! Clarify the maximum number of independent directors to serve in three domestic listed companies, and the China Securities Regulatory Commission has issued new regulations on independent directors for listed companies

Red Star Capital Bureau reported on August 4th that today, the official website of the China Securities Regulatory Commission released the "Management Measures for Independent Directors of Listed Companies", which will come into effect on September 4th, 2023.

The Measures for Independent Directors will be publicly solicited for opinions from the public from April 14 to May 14, 2023. The revised and improved "Measures for Independent Directors" consists of six chapters and forty-eight articles, which involve "five clarifications", namely clarifying the qualifications and appointment and removal procedures of independent directors, clarifying the responsibilities and performance methods of independent directors, clarifying performance guarantees, clarifying legal responsibilities, and clarifying transitional period arrangements.

According to the official website of the China Securities Regulatory Commission

It is clear that independent directors should serve as independent directors in a maximum of three domestic listed companies, and should ensure sufficient time and energy to effectively fulfill their duties as independent directors. Set up a one-year transition period for the establishment of the board of directors and specialized committees of listed companies, the mechanism of special meetings for independent directors, the independence of independent directors, their qualifications, tenure, and the number of part-time positions.

Clarify job qualifications and appointment and removal procedures

Serving as independent directors in up to three domestic listed companies

The Independent Director Measures clarify the definition and responsibility positioning of independent directors. Independent directors should play a role in decision-making, supervision and balance, and professional consulting in the board of directors. At the same time, it is required that listed companies establish an independent director system. The proportion of independent directors to the members of the board of directors shall not be less than one-third; Listed companies should establish an audit committee in their board of directors, with more than half of the independent directors.

In terms of qualifications and appointment and removal, the Independent Director Measures specify the independence requirements for independent directors. Refine the criteria for determining independence in terms of appointment, shareholding, and significant business transactions. For example, individuals serving in a listed company or its affiliated enterprises, as well as their spouses, parents, children, and major social relationships, are not allowed to serve as independent directors of the listed company.

In addition to independence requirements, the Independent Directors Measures specify that independent directors should meet the qualifications of general directors, possess professional knowledge in the operation of listed companies, have more than five years of legal, accounting, economic and other work experience necessary to perform their duties as independent directors, and have good personal character.

In terms of selection. According to regulations, the board of directors, supervisory board, and shareholders who individually or collectively hold more than 1% of the shares of a listed company may propose candidates for independent directors, but may not nominate individuals who have an interest relationship with them; If a listed company sets up a nomination committee, it shall review whether the nominated person meets the qualifications for appointment and form a review opinion; The election of independent directors at the shareholders' meeting shall adopt a cumulative voting system.

Clearly define the focus of job performance

Attention should be paid to potential significant conflicts of interest between listed companies and controlling shareholders

The Measures for Independent Directors specify the key points for independent directors to perform their duties. Independent directors should focus on potential significant conflicts of interest between the listed company and its controlling shareholders, actual controllers, directors, and senior management. At the same time, clarify the special powers of independent directors. Independent directors can independently hire intermediary agencies, propose to convene an extraordinary shareholders' meeting to the board of directors, propose to convene a board meeting, solicit shareholder rights, and express independent opinions.

When it comes to the specific requirements for independent directors to participate in board meetings, the "Independent Directors Measures" state that before the meeting, independent directors can communicate with the secretary of the board of directors on the proposed matters for review; In principle, independent directors should attend the meeting in person; After the meeting, independent directors should continue to monitor the execution of board meetings related to potential significant conflicts of interest. The disclosure of related party transactions, changes or exemptions to commitments, and implementation of anti acquisition measures shall be approved by a special meeting of independent directors before being submitted for review by the board of directors; The disclosure of financial reports and internal control evaluation reports, hiring or dismissing accounting firms, appointing or dismissing financial leaders, accounting policies, changes in accounting estimates, or corrections to significant accounting errors, among other four types of matters, shall be approved by the audit committee in advance before being submitted to the board of directors for review; The appointment, removal, compensation, and other matters of directors and senior management personnel shall be recommended to the board of directors by the nomination committee, compensation and assessment committee.

Establish a sound mechanism for ensuring the performance of independent directors

Listed companies should regularly report their operational status to independent directors

The Measures for Independent Directors specify the need to improve the mechanism for ensuring the performance of independent directors. Listed companies should provide necessary working conditions and personnel support for independent directors to fulfill their duties. Independent directors should be regularly informed of the company's operational situation, provide information, and organize or cooperate with them to conduct on-site inspections. Establish a sound relief mechanism for restricted performance of independent directors. If independent directors encounter obstacles in their performance of duties, they may explain the situation to the board of directors, request the cooperation of directors, senior management personnel, etc., and record the relevant situation in their work records; If obstacles cannot be eliminated, they can be reported to the China Securities Regulatory Commission and the stock exchange.

For listed companies, independent directors, and related entities that violate the provisions of the Measures for Independent Directors, the China Securities Regulatory Commission may take regulatory measures or impose administrative penalties in accordance with the law.

In terms of determining the responsibility of independent directors, the Independent Directors Measures specify that the administrative responsibility of independent directors can be determined based on the degree of correlation between their performance and related illegal and irregular behaviors, as well as their director status and external identity characteristics, taking into account the role of independent directors in information formation and related decision-making processes, their level of knowledge, and their attitude after being informed. In addition, it also clarifies the exemption reasons for administrative penalties imposed on independent directors. If an independent director can prove that he/she has fulfilled his/her basic duties and that he/she is unable to detect problems with specialized professional assistance before reviewing or signing documents, or if a listed company deliberately conceals information and the independent director is unable to discover clues of illegal activities, he/she may not be punished in accordance with the law.

In addition, the China Securities Regulatory Commission has clearly set a one-year transitional period for the establishment of the board of directors and specialized committees of listed companies, the mechanism for special meetings of independent directors, the independence of independent directors, their qualifications, term of office, and the number of part-time positions. During the transition period, if the above matters are inconsistent with the Independent Directors Measures, they should be gradually adjusted to comply with the regulations.