Who must comply with ASX-listed entity board independence + composition (CGC Principle 2)?

ASX entities should have majority-independent boards + clear board charter.

Principle 2 of the Corporate Governance Principles and Recommendations (fourth edition, February 2019) asks a listed entity to structure its board to be effective and add value. Its recommendations are that a majority of the board be independent directors (2.4); that the chair be an independent director and not the same person as the CEO (2.5); that the entity have a nomination committee of at least three members, a majority independent and chaired by an independent director, or explain its alternative processes (2.1); that it disclose a board skills matrix (2.2); that it disclose which directors it considers independent and each director's length of service (2.3); and that it run induction and professional development for directors (2.6). The recommendations are not mandatory: Listing Rule 4.10.3 requires each entity to report against them on an 'if not, why not' basis.

Applies when the business has an ASX listing.

How the regulator frames it: Entities admitted to the ASX official list as an ASX Listing. ASX Debt Listings and ASX Foreign Exempt Listings are outside Listing Rule 4.10.3 (Guidance Note 9).

What triggers it: Being an ASX Listing at any time during a reporting period. The board decides whether to adopt each Principle 2 recommendation; if it does not follow one for any part of the period, it must say so and give its reasons and any alternative practice adopted.

Jurisdiction: Commonwealth law, so the test is the same in every state and territory.

Outcome across the 35 industries Rules Mate maps (35 of 35: no).

The answer is the same in every industry: no. Industry does not change who must comply.

Structure does not change the answer across all industries: for every structure the answer is "no".

Size does not change the answer across all industries: at every size band the answer is "no".

Each line is one run of the Rules Mate applicability engine for a single business profile, with the reason the engine gives:

• Pty Ltd company in real estate agents with 6–19 employees, turnover $1M–$3M: does not apply. Requires an ASX listing.

Starting from a small or large professional services company that does not otherwise meet the test, each of these single facts changes the engine's answer:

• The business is listed (or listing) on the ASX: it then applies (ASX-listed (or preparing to list)).

When due

Each reporting period. The corporate governance statement (or the URL where it is published) goes in the annual report, must be current at the balance date or a later date the entity specifies, and must be approved by the board. An Appendix 4G is lodged with ASX at the same time as the annual report.

Frequency

Annual

Evidence to keep

Board-approved corporate governance statement and Appendix 4G; nomination committee charter, membership and meeting attendance; board skills matrix; independence assessments of each non-executive director against the Box 2.3 factors, made at least annually; record of each director's length of service; director induction and professional development records.

Status

Current

Priority

High

Maximum penalty: No penalty attaches to departing from a Principle 2 recommendation, provided the departure and reasons are disclosed. Failing to give the corporate governance statement or Appendix 4G required by Listing Rules 4.10.3 and 4.7.3 is a breach of the Listing Rules, which ASX enforces under its compliance and enforcement practices.

Rules Mate has not yet classified the audit or assurance level for this obligation. Any audit, review or certification requirement is set by the regulator source listed below.

If this obligation applies to you, so do these 5: the engine uses the same rule for each.

• Comply with ASX continuous disclosure (Listing Rule 3.1)
• Apply 'if not why not' against ASX Corporate Governance Council Principles &
• Two-strikes rule on listed-company remuneration report (s 250R)
• Maintain insider trading policy + share trading window (listed entities)
• Lodge a prospectus for offers requiring disclosure

Rules Mate tracks 4 published obligations tagged "corporate governance", 1 of them rated critical. For a professional services Pty Ltd company with 6–19 employees operating in every state, 0 of those apply outright. This obligation is rated high priority, and is a annual obligation.

Regulated by Australian Securities Exchange (listing rules supervision).

ASX: Operator of the principal Australian securities exchange. Listing Rules govern continuous disclosure, corporate governance, and capital raising for listed entities.

• Australian Securities Exchange (listing rules supervision)

Free tools that help with this obligation:

• Compliance calendar builder