Lighter NZX rules should provide flexibility, not lower governance standards
NZX’s proposed framework for smaller listed companies aims to reduce the burden of being listed without lowering expectations of good governance.
NZX is proposing a lighter compliance framework for smaller listed companies, aimed at reducing the cost and complexity of being listed and making the Main Board a more workable option for companies that may not need the same regulatory settings as larger issuers. Around 46 existing issuers could qualify under the proposed $125 million market capitalisation threshold.
The IoD supports greater proportionality. The new settings should give boards flexibility to choose governance arrangements that fit their company, rather than establish a lower governance model for smaller listed companies. Market capitalisation determines eligibility for the regime; boards still need to decide what governance arrangements are appropriate in practice.
For directors, the proposals would mean greater discretion over matters such as board independence, audit oversight, related-party transactions and capital raising. That flexibility can be useful, particularly for smaller boards, and places more emphasis on board judgement about which settings to use and their combined effect.
We support reducing the mandatory minimum to one independent director and allowing the full board to perform audit committee functions, while retaining the Corporate Governance Code’s stronger recommendations. Where boards depart from those recommendations, investors should continue to receive a meaningful explanation of the governance arrangements in place.
NZX should review the regime after three years to assess whether it is helping companies list and raise capital, how the different concessions are being used together, and whether there are material effects on governance practice or investor confidence.