NZX Director Independence Review update: implications for directors

The recent Director Independence Review by NZX, supported by the NZX Corporate Governance Institute (on which IoD is represented), has introduced updates to the Listing Rules, Corporate Governance Code, and Governance Guidance Note. These changes, announced on 18 December, aim to address investor concerns, strengthen protections for minority shareholders, and enhance the robustness of governance practices for listed issuers in New Zealand. 

Key Takeaways for IoD Members 

The key themes in the changes made are: 

• Enhanced disclosure and transparency: New requirements mandate issuers to disclose details when directors with potential conflicts of interest (Code factors) are assessed as independent. Transparency is emphasised for shareholder confidence, requiring disclosures in notices of meeting, market announcements and annual reports from FY2025. 
• Evolving independence standards: Refinements to the "Disqualifying Relationship" definition now ensure each test criterion is applied separately, improving clarity. Issuers must assess director relationships in advance of applying conflict management frameworks. This approach strengthens minority shareholder protections and governance objectivity. 
• Audit and takeovers committees: The Corporate Governance Code has been updated to recommend having at least one independent director with financial expertise on audit committees. For takeovers, while some conflicts may be unavoidable, committees should prioritise independence in relation to bidders or associated parties. 

IoD members should consider these updates to governance practices to uphold high standards and foster trust, and they are mandatory for NZX-listed companies and on a comply or explain basis for the NZX Governance Code)  

Key actions for boards to consider based on these changes to the director independence requirements include: 

• Reviewing and enhancing board policies on independence assessment and conflict management 
• Strengthening disclosures in governance reporting, aligned with "comply or explain" requirements under the NZX Code 
• Investing in director education, particularly on financial and governance complexities, to meet committee requirements and broader stakeholder expectations 

Resources for Further Reading: 

IoD: Four Pillars of Governance Best Practice (see sections 2.4, 3.4, and 4.9). 

NZX: Listing Rules , Corporate Governance Code , and Governance Guidance Note. 

AI assisted