Overview of UK Corporate Governance Code 2024
On 22 January 2024, the Financial Reporting Council (the FRC) of UK published a revised version of the UK Corporate Governance Code (2024 Code). The UK Corporate Governance Code applies to all companies with a premium listing in the UK, though other companies may also choose to apply it. Under the Financial Conduct Authority's proposals for reform of the UK listing regime for equity shares, 3 a new "commercial companies" category will replace the current premium and standard listing segments and it will be a requirement for companies in that category to apply the Code on a "comply or explain" basis. The UK government is not currently taking forward its plans to modernise the legislative framework around audit, corporate reporting, and governance, and in the light of stakeholder feedback, the FRC has adopted a more targeted approach. It has prioritised its revisions to those parts of the Code that deal with internal controls and made a small number of changes to streamline expectations and clarify language. Some highlights are as follows-
- The board is responsible not only for establishing, but also for maintaining the effectiveness of, the risk management and internal control framework.
- Minimum Standard on Audit Committees and the External Audit.
- A description in Annual Report of how the board has monitored and reviewed the effectiveness of the framework.
- A declaration in Annual Report of effectiveness of the material controls as at the balance sheet date.
- Companies to ensure that their governance reporting focuses on board decisions and their outcomes in the context of the company's strategy and objectives.
- Board's role to not only assess and monitor company culture but also to ensure that the desired culture has been embedded within their organisation.
- Promotes diversity, inclusion, and equal opportunity.
- Directors' contracts and/or other agreements or documents which cover director remuneration should include malus and clawback provisions that would enable the company to recover and/or withhold sums or share awards, and specify the circumstances in which it would be appropriate to do so.
