The China Securities Regulatory Commission issued revisions to the Code of Corporate Governance for Listed Companies on 17 October, further refining the conduct requirements for directors, senior management, controlling shareholders and de facto controllers, and aiming to improve corporate governance among listed firms. The new code will take effect on 1 January 2026.
Compared to the current version, the revised code enhances the salary incentive and restraint mechanisms, requiring listed companies to establish payroll systems that align salaries with business performance and individual results, thereby binding executives’ interests to the company.
When a company shifts from profit to loss or its losses widen, but the average performance-based pay of directors and executives does not fall accordingly, the company must fulfill its disclosure obligations and explain the reasons. The code also encourages companies to design remuneration schemes incorporating deferred payment and clawback arrangements, suited to their industry characteristics, to enhance long-term incentives and accountability.
The code also steps up supervision of directors and executives throughout their appointment, performance of duties and departure. During board deliberations, if an agenda item involves a director or executive’s personal interest, the relevant personnel must recuse themselves. Where resolutions exceed the board’s authority, they must be submitted to the shareholders’ meeting for approval. The code further requires listed companies to define in contracts with directors and executives the post-employment obligations and clawback provisions.
On behavioural norms, the code imposes strict restrictions on intra-sector employment. Controlling shareholders and de facto controllers are prohibited from engaging in competing businesses that cause significant detriment to the listed company. If such persons engage in business that does not cause significant detriment to the listed company, they must disclose the relevant information in a timely manner.
