Hong Kong must tighten the rules on initial public offering (IPO) candidates to ensure greater oversight of the firms by outside directors prior to the listings, a non-executive directors group said.
Companies that seek to raise funds from the public must have outside directors in a hands-on role on the board for at least a year prior to the launch of IPO applications, the Hong Kong Independent Non-Executive Director Association (HKiNEDA) said.
The existing rules cannot ensure that independent non-executive directors (INEDs) acquire sufficient knowledge about the companies before the listings, the association’s chairman Anthony Fan Renda told the Hong Kong Economic Journal.
INEDs play a crucial role in the oversight of a company and its management in order to protect the interests of all shareholders, Fan pointed out in an interview.
The existing rules do not ensure enough power for the INEDs to perform their duties to the fullest, he said.
Fan also urged companies to adopt the nomination system of European and American companies which hire head-hunters to find qualified INEDs for the positions, rather than simply look for friends of the largest shareholders to meet the requirement for the INEDs as many Asian firms do.
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