On 24 May, the Financial Reporting Council has published its long anticipated consultation on the UK Corporate Governance Code, the intention of which is to focus on the legislative and governance reforms that the Government proposed in its May 2022 white paper “Restoring trust in audit and corporate governance”. These are designed, amongst other things, to “support the FRC’s transition into the Audit, Reporting and Governance Authority (ARGA).” The proposals now put out for consultation build on the white paper, and a subsequent position paper from the FRC. The consultation closes on 13 September 2023.
The FRC has indicated that this is a “limited revision [which] aims to enhance the Code's effectiveness in promoting good corporate governance, some of the changes include:
The “main proposed changes concern those parts of the Code which deal with the need for a more robust framework of prudent and effective risk management and internal controls. They are aimed at providing a stronger basis for reporting on, and evidencing the effectiveness of, the framework during the reporting period.” The FRC has also taken the opportunity to remove areas of the Code which duplicate provisions in Audit Committees and the External Audit: Minimum Standard, published on Monday and to consult on areas identified in the most recent Review of Corporate Governance Reporting as those in which reporting can be improved.
We were particularly pleased to see the proposal to amend the Code to pick up some of the recommendations from the Institute’s Review of the effectiveness of independent board evaluation in the UK listed sector and that the FRC “propose(s) to incorporate many aspects of the CGI’s guidance in our revised guidance.”
There will be an opportunity to hear direct from the FRC on the proposed changes at our annual conference on 5 and 6 July.
Overall, the proposed changes look very welcome, but the Institute will be discussing with members how we should respond to the consultation proposals over the Summer before the consultation closes on 13 September. Those who would like to be included in our working groups are asked to contact the team on firstname.lastname@example.org.