On 22 January 2024, the Financial Reporting Council (FRC) published its revised UK Corporate Governance Code (Code). This followed a consultation last year on proposed revisions to the Code and a policy update in November 2023, in which the FRC confirmed that it would only be proceeding with certain of its original proposals.
We have previously covered the key changes that were proposed to the Code, along with a summary of published responses to the consultation, in our article “Proposed changes to the UK Corporate Governance Code – published responses call for balance, flexibility and better recognition of key roles”, and the FRC policy update in our article “Proposed changes to the UK Corporate Governance Code – FRC policy update”.
In its press release announcing the publication of the new Code, the FRC explained that:
‘In a significant move aimed at promoting smarter regulation, the FRC has kept changes to the Code to the minimum that are necessary. The FRC is conscious that the expectations for effective governance must be targeted and proportionate. This approach ensures the FRC balances underpinning trust and confidence in UK plc for investors and others whilst keeping burdens on businesses to the minimum necessary.’
Revisions to the sections of the Code dealing with internal controls have therefore been prioritised, whilst earlier proposals relating to:
have not been taken forward.
The main substantive change is therefore the introduction of a new provision that boards should explain through a declaration in their annual reports how they have reviewed the company’s risk management and internal control framework and their conclusions. This new declaration will come into effect from 1 January 2026 to give boards more time to develop their approaches to internal controls, with the rest of the updated Code coming into effect from 1 January 2025.
A small number of other changes to streamline the Code and clarify language have also been made. A summary of the principal changes is available here: UK Corporate Governance Code 2024 Key Changes (frc.org.uk)
The FRC has also published revised guidance to accompany the new Code. This guidance is not mandatory, but rather is intended to support users of the Code by providing advice, further detail and examples of good practice. It consolidates previously published FRC guidance on board effectiveness, audit committees, and risk management and related financial and business reporting.
Divided into five sections mirroring the structure of the Code, the guidance also introduces a new section to support the effective management of board committees, including risk and sustainability committees which, although not included in the Code, may be required for some companies under other legislation or regulation.
Companies with a premium listing on the London Stock Exchange are required to report against the Code, although other companies choose to do so on a voluntary basis recognising the value of good governance.
Michelmores’ Corporate Services team has a wealth of experience in statutory compliance and all aspects of corporate governance. Please do get in touch with any member of the team or email cosec@michelmores.com.
