In July 2018 the Financial Reporting Council (FRC) released the 2018 edition of the UK Corporate Governance Code. The new Code is described as “shorter and sharper” than its predecessor and has been the product of extensive consultation. Companies will need to adapt to a range of changes in areas such as workforce and shareholder engagement, corporate culture, board succession and diversity and remuneration.
The Code is supported by revised Guidance on Board Effectiveness, which boards are encouraged to read alongside the Code. The Guidance is principally designed to stimulate thinking on how boards can carry out their role effectively.
The new Code will apply to accounting periods beginning on or after 1 January 2019. This means that the first reporting by reference to the Code will generally be seen in 2020, although some companies may choose to adopt the Code earlier. The Code will be mandatory for companies with a premium listing. Like the current edition, rather than complying with a rigid set of rules, companies will need to apply the 18 Principles and either comply with the 41 Provisions or explain why they have not done so. The Supporting Principles have been removed.
Companies with a premium listing and other companies that have chosen to apply the Code should review their existing policies and practices against the new Code and consider the steps that need to be taken. Any actions will need to be implemented in the next few months, before the start of the first compliance period in 2019.
Click here for our briefing note on the new UK Corporate Governance Code and its practical implications.