…the Financial Reporting Council (FRC) has recently published a new version of the Combined Code on Corporate Governance?
The main changes in the new Code are that:
- It now permits an individual to chair more than one FTSE 100 company
- For listed companies outside the FTSE 350, it now allows the company chairman to be a member of, but not chair, the audit committee, provided he was considered to be independent on appointment (provision C.3.1)
Schedule C to the Code has also been updated to include the disclosure requirements under new Section 7.1 of the Disclosure and Transparency Rules, which implements EU requirements on audit committee and corporate governance statements. DTR 7.1 sets out the requirements regarding audit committees and their functions and DTR 7.2 the requirements for corporate governance statements.
The FRC has identified a number of Code provisions which overlap with the requirements of new DTR 7.1 and 7.2. These provisions are set out in an Appendix to the Code. The overlap has been dealt with in DTR 7 which states that, where a company has complied with these provisions of the Code, it will also be deemed to have complied with the relevant requirements of DTR 7. However, where a company chooses to explain, rather than comply, with any of these Code provisions, it will need to ensure that it nonetheless meets the requirements in DTR 7. This effectively means that the “comply or explain” approach no longer applies in respect of these Code provisions.
The revised Code, and DTR 7, apply in respect of accounting periods beginning on or after 29 June 2008. The Code can be obtained from the FRC website at www.frc.org.uk/corporate/combinedcode.cfm. DTR7 forms part of the FSA Handbook which is available from the FSA website at www.fsa.gov.uk.