This morning, the Financial Reporting Council published the guidance to accompany the updated UK Corporate Governance Code, published last Monday, which will come into effect from 1 January 2025 or, in the case of new Provision 29 on internal controls, 1 January 2026.
The new guidance has effectively combined the existing three sets of guidance –Guidance on Board Effectiveness, Guidance on Audit Committees and Guidance on Risk Management Internal Controls and Related Financial Business – into one shorter document.
The FRC has been keen to emphasise that the guidance is no more or less than that – guidance. There has been some anecdotal evidence that some investors or their agents have been treating the guidance as part of the Code. The FRC, however, has been very clear that the Code is on a ‘comply or explain’ basis and that the guidance simply offers suggestions as to how companies might demonstrate compliance. It is, emphatically, not mandatory and should not be treated as such.
In our press release, published today, I commented that:
“We welcome the new guidance on the UK Corporate Governance Code published this morning.
There are a number of sensible and helpful revisions and we are pleased to see that several of the suggestions in our consultation response have been included. The FRC’s guidance is enormously helpful to companies in providing examples of ways in which they can demonstrate compliance with the Code and we welcome the clarity with which the guidance states that it is “not mandatory, and not part of the Code itself, and is not prescriptive. It contains suggestions of good practice to support directors and their advisors in applying the Code.”