FMA consults on draft of its updated Corporate Governance Handbook

Wednesday 15 November 2017

Authors: Amon Nunns and Toni Forrest

​​The Financial Markets Authority is seeking submissions on a "refresh" of its Corporate Governance Handbook (the FMA Handbook).  

A draft form of the updated FMA Handbook was released yesterday as part of an FMA consultation paper – which can be accessed here. The FMA Handbook was last updated in 2014.

There are two principal changes from the current version of the FMA Handbook:

  1. The recently published NZX Code will become the primary guidance on corporate governance principles for companies listed on NZX's markets.
  2. The guidance contained in the handbook has been updated to align it with developments in corporate governance since the handbook was first published.

For NZX listed issuers, this is a welcome update. It clarifies that, although reporting against the FMA Handbook principles was only ever voluntary, listed issuers will not have any need to explain how they comply with the principles in the FMA's Handbook over and above their reporting obligations under the NZX Code's 'comply or explain' regime. For further information regarding the NZX Code see our earlier update here.

This is not to say that the monitoring of NZX listed issuers' corporate governance practices will be "out of bounds" for the FMA. To the contrary, the FMA intends to continue to engage with NZX and take appropriate action where it finds examples of poor governance.

Key points to note for users of the new FMA Handbook include that: 

  1. the focus is now on unlisted and public sector entities,
  2. the nine FMA Corporate Governance Principles have been reduced to eight to maintain alignment with the NZX Code,​
  3. the FMA has retained the approach of having boards (of unlisted and public sector entities) explain how each principle is complied with. This is different from the 'comply or explain' for approach NZX listed issuers under the NZX Code. The FMA believes that explaining how an entity has implemented each of the principles allows greater flexibility for reporting by the broader range of entities that the updated FMA Handbook will apply to, and 
  4. the guidance contained in the FMA Handbook has been updated in a number of areas, including that:
    • ​​​​​​boards of companies that intend to raise capital and/or list in the future, or are otherwise perceived to be publicly accountable due to their role in the financial markets, are encouraged to either have, or build towards, a majority of non-executive directors and have a minimum one-third of independent directors,
    • the chair of the audit committee should not have a long-standing association with the external audit firm, as either a current or retired audit partner or senior manager within that firm,
    • boards should determine the appropriate level of non-financial reporting, considering the interests of their stakeholders and all relevant environmental, social and governance (ESG) factors,
    • there is greater transparency proposed regarding long and short term incentives as part of remuneration for directors, 
    • there is greater focus on risk management and ESG matters, and
    • there is expanded guidance regarding audit engagements, including in relation to appointment, non-audit work and independence.

​We see the update as a positive and timely development for listed, unlisted and public sector entities – especially avoiding potential duplication with the NZX Code by removing listed companies from the scope of the FMA Handbook. 

Next steps

The FMA proposes to release the updated handbook in early 2018 and is calling for submissions by 8 December 2017

If you would like guidance on how the updated FMA Handbook will affect your current corporate governance practices and reporting requirements, our team of specialists are available to assist.

Listed companies

For NZX listed issuers, if you would like assistance with transitioning to the NZX Code, please do not hesitate to contact your usual Bell Gully adviser or one of the individuals listed on the right-hand side. ​


This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.

For more information
  • Amon Nunns

    Partner Wellington
  • James Cooney

    Partner Auckland
  • Toni Forrest

    Partner Wellington
  • Philip Leightley

    Senior Associate Auckland
Related areas of expertise
  • Corporate governance and advisory
  • Equity capital markets