In December 2009, the Financial Reporting Council (FRC) published the final report on its review of the effectiveness of the Combined Code on Corporate Governance and announced a consultation on a revised Code.

The final report and the latest consultation follows the consultation announced last summer (see our September 2009 E-Bulletin article: Combined Code – FRC announces further consultation) and the recent publication of the final Walker Report on corporate governance in UK banks and other financial institutions (see our January 2010 E-Bulletin article: HM Treasury publishes final Walker Report on corporate governance in UK banks).

The FRC is consulting on various proposed changes to the Combined Code.

The FRC proposes to adopt those recommendations from the Walker Report that are appropriate for all listed companies. In particular, new Code principles are proposed on the roles of the chairman and non-executive directors, the composition and balance of the board, the commitment expected of directors and the board's responsibility for risk. Strengthened provisions on director development and board evaluation are being proposed. The FRC is also consulting on whether the chairman or, alternatively, all directors should be re-elected annually.

It is proposed that the name of the Combined Code be changed to "The UK Corporate Governance Code" in order to make its status as the UK's recognised corporate governance standard clearer to foreign investors.

It is intended that Section E of the Combined Code, which is addressed to institutional shareholders, be deleted. Instead, in light of the Walker Report recommendation that investors be subject to a separate code, the FRC has agreed to take responsibility for the proposed new Stewardship Code for institutional investors. The Stewardship Code will be subject to a separate consultation in due course.

Consultation on the draft revised Code ends on 5 March 2010. The Listing Rules will need to be amended before the revised Code can take effect and consequential amendments may also need to be made to the Disclosure and Transparency Rules. Subject to that, it is currently intended that the revised Code apply to accounting periods beginning on or after 29 June 2010.

View the FRC final report (40 page pdf).

View the FRC consultation on the revised Code (48 page pdf).