HONG KONG SAR, CHINA Trends and Developments Contributed by: Vincent Lung and Mike Yeung, Parkside Chambers
lished for the corporate governance regime. They include the Listing Rules and the Corporate Gov - ernance Code (“CG Code”) issued by HKEx, which apply to companies listed on HKEx in Hong Kong, and sets of guidelines on corporate governance issued by Hong Kong Institute of Directors and Hong Kong Institute of Certified Public Accountants as well as Non-statutory Guidelines on Directors’ Duties issued by the Companies Registry. These primarily focus on directors’ duties (and delegation of any functions), with an emphasis on internal controls, financial report - ing, information disclosure and shareholders’ exercise of rights. Relevant cases and analyses Over the years, enforcement actions (including but not limited to disciplinary actions, market misconduct proceedings, and SFO ss. 213 and 214 proceedings) have been actively taken by regulators such as the SFC to track down and penalise parties responsi - ble for lamentable transactions which revealed risk management deficiencies in listed companies and licensed corporations in Hong Kong. More recently, these transactions include: • substantial lending without proper due diligence on the counterparties and without proper disclo - sure and/or approval (see SFC v Jia Yueting (2026) HKCFI 2152); • overstatement of key financial information without proper enquiries and investigation and/or approval (see SFC v Liu Zhongkui (2021) HKCFI 1975; SFC v Yu Longrui (2022) HKCFI 653); • concealed connected transactions without proper enquiries and investigation and/or approval (see Longrun Tea Group Company Limited ); • acquisition of valueless assets without proper due diligence on the counterparties and without proper disclosure and/or approval (see SFC v Superb Summit International Group Limited (2025) HKCFI 3713); • (mis)use of IPO proceeds without proper enquiries and investigation ( SFC v Au Yeung Ho Tin (2024) HKCFI 2573); • suspected market misconduct and money launder - ing activities by customers of a licensed corpora - tion without a proper and adequate system for
KYC and for screening trades to mitigate money laundering and terrorist financing risks (see • Re MTF Securities Limited); and • inaccurate classification of customers’ professional investor status due to deficiency in its internal con - trols systems (see Re UBS AG, dated 20 October 2025 ). As one would naturally expect, the board of direc - tors plays a central role in ensuring good corporate governance. Hong Kong, like all other common law jurisdictions, has adopted a unitary board structure. Good corporate governance hinges upon boardroom behaviour, composition of the board, inter-relationship of the board’s members and how the board discharg - es its business. It has been suggested (see “Board - room Behaviours” 2009 by the Institute of Chartered Secretaries and Administrators) that the best prac - tice boardroom behaviour (characterised by attributes such as appropriate deployment of knowledge and skills and experience, independent thinking, evalua - tion and judgment, constructive challenge, rigorous debate, etc) is shaped by personality of the directors, dynamics of the directors’ interactions and the bal - ance in the relationship between the executive and non-executive directors, culture of the boardroom and of the company. Accordingly, independence, board diversity, informa - tion transparency and internal controls and risk man - agement have always been the focal point in the Hong Kong corporate governance regime (see, for example, the CG Code CP A.3, A.7, C.2; Listing Rules LR3.10). Further, listed companies in Hong Kong are also required to make annual report on environmental, social and governance (“ESG Reports”) to ensure better risk management and thus sustainability in the constantly evolving modern world (see Appendix C2 of Listing Rules; see also ESG in Practice). On an international context, sustainability-related disclosure has expanded from 86% global market capitalisation in 2022 to 91% in 2024 (see Global Corporate Sus - tainability Report 2025 dated 29 October 2025 by the Organisation for Economic Co-operation and Devel - opment), which reflects continued demand for such information from investors as the information can be material for their decisions to buy or sell securities
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