FRC announces targeted consultation on UK Corporate Governance Code
25 May 2023
25 May 2023
Yesterday, the Financial Reporting Councilpublishedits public consultation paper on proposed 'targeted' revisions to the UK Corporate Governance Code (Code).
The proposed revisions to the Code are technical rather than structural, with no changes proposed to the approach of a principles-based framework, or the 'comply or explain' underpinning of the Code.
Although amendments are proposed to all five sections of the Code, most of the changes are in section 4 (Audit, Risk and Internal Control). This means that, unlike the last wide-ranging review of the Code in 2018, the FRC has focused this consultation on the legislative and governance reforms which support the FRC's transition into the Audit, Reporting and Governance Authority and reflect the government's underlying agenda ofRestoring Trust in Audit and Corporate Governance.
The main proposed changes:
The revised Code will be supported by updated guidance, including updatedGuidance on Audit CommitteesandGuidance on Board Effectivenessto follow once the Code changes have settled. The FRC will also amend theGuidance on Risk Management, Internal Control and Related Financial and Business Reportingspecifically to take account of changes to Principles and Provisions on risk management and internal control.
The consultation helpfully includes a tracked draft revised Code, as well as a clean version and a summary of draft secondary legislation on corporate reporting for 'new' PIEs.
As part of its market engagement, the FRC will host a series of roundtables throughout the consultation period. These will focus on three main topics:
The schedule for these roundtables and how to apply can be foundhere.
Responses to the consultation must be submitted by13 September 2023. The revised Code is expected to apply to reporting periods beginning on or after1 January 2025.
The targeted approach taken by the consultation is to be welcomed given the extent of other government reforms which companies, particularly 'new' PIEs, will need to assimilate on the same timetable. Given that the FCA'slisting regime reformsinclude a proposal to create a single listing segment which will create a new cohort of companies which must apply the Code for the first time, the FRC's focus on streamlining its content, removing duplication and adding practicality will also be helpful.
我们期待与客户公关oposals with a view to shaping our and their responses to the consultation.
We will publish further, more detailed, overviews and commentary in due course to help in that process.