The UK Corporate Governance Code: Key provisions and updates
The UK Corporate Governance Code codifies good governance for businesses and investors. It's required for UK-listed companies and provides all organisations with a valuable framework for transparent, defensible management.
The Code underwent an extensive update this year. Risk management, stakeholder engagement and board performance have become more significant, and disclosures in areas such as material internal controls are now required.
With the latest version taking effect in January 2025, chief audit officers, board directors, general counsel, and corporate secretaries have little time to get up to speed and prepared.
Here’s a brief primer on what to know and do next, including:
- The UK Corporate Governance Code’s purpose and history
- Who the Code applies to and when
- The role of the Financial Reporting Council (FRC)
- Key provisions and requirements for the UK Corporate Governance Code
- How the right technology can help
Purpose and history of the UK Corporate Governance Code
The UK Corporate Governance Code was enacted to define good governance and encourage more transparency. The mission: Investors can compare one organisation against another and companies can align their structure with their culture and values.
In the code, five Principles outline proper board conduct in areas such as:
- Board leadership and company purpose
- Division of responsibilities
- Composition, succession, and evaluation
- Audit, risk, and internal control
- Remuneration
Provisions bring these principles to life by explaining what a board should do in a specific situation, like when a director resigns.
Who does the Code apply to and when?
Since 2018, all companies listed on the London Stock Exchange have had to comply with the UK Corporate Governance Code, whether they’re incorporated in the UK or not.
Many of the code’s requirements overlap with the UK Listing Rules, and the code starts applying to a company as soon as it becomes UK premium listed. In fact, the UK’s Financial Reporting Council (FRC) recommends that any business planning on a UK listing start preparing for the UK Corporate Governance Code well in advance.
The role of the Financial Reporting Council (FRC)
As the UK’s independent regulator for auditors, accountants, and actuaries, the FRC sets and enforces standards for corporate governance, auditing, and financial reporting. To help businesses with the UK Corporate Governance Code, its publications offer ongoing guidance for implementing regulations.
Importantly, the FRC also regularly conducts independent reviews of the code to see if updates are needed to ensure efficiency and effectiveness. Such revisions have been incorporated into the 2024 version of the code, which will start applying to UK-listed companies at the beginning of 2025.
Key provisions and updates of the UK Corporate Governance Code
As previously explained, the UK Corporate Governance Code operates through broad principles and specific provisions — many of which have been updated and amended in 2024.
In the area of audit, risk, and internal controls, for example, the code requires a board to clearly understand the company’s risk management strategy and ensure that this strategy is effective and efficient. This year’s updates, specifically Provision 29, expand expectations for how the board demonstrates such understanding and oversight through monitoring, management, and reporting.
Another key focus is remuneration: how a company ensures that its principles and policies align with business strategy. The 2024 code spotlights the board’s remuneration committee and specific policy areas such as malus and clawback provisions.
For all these principles and provisions, boards can better prepare by concentrating on four key areas:
1. Board effectiveness and performance
The FRC changed references to “board evaluation” to “board performance review,” noting that “governance reporting should focus on board decisions and their outcomes in the context of the company’s strategy and objectives. Where the board reports on departures from the code’s provisions, it should provide a clear explanation.”
Another amendment details that “boards should not only assess and monitor culture, but also how the desired culture has been embedded.”
With all this in mind, boards can get ahead of increased scrutiny by:
- Conducting internal and external performance reviews to understand board and committee performance
- Running and evaluating these reviews regularly
- Including code priorities like succession planning in these reviews to make sure strategies are efficient and effective
“There may be reasons to keep a chair in post, but boards must think very carefully about their composition, refreshment, and succession planning, and offer an explanation,” the FRC writes.
2. Stakeholder engagement and communication
Reporting and disclosures are central to what’s new for 2024. Provision 29 addresses the effectiveness of material internal controls, for example, and a new principle encourages company reporting on outcomes and activities.
This means your board must have a firm grasp on its reporting and disclosure activities and the stakeholder and shareholder relationships behind them. Some questions to consider:
- How efficient and effective are your communication and engagement strategies?
- Do disclosures like your annual report provide a clear, concise overview of company performance?
- Do these disclosures include risk management and internal controls?
3. Audit and risk management
Provision 29 requires boards to monitor their company’s risk management and internal controls and review their effectiveness at least once a year.
This means the right framework becomes more important than ever for identifying and mitigating risks, the audit committee equipped to oversee it all and seamless board collaboration.
- Does monitoring and review cover all material controls: financial, operational, reporting, and compliance?
- Are you able to quickly see what’s working and describe the processes behind this assessment?
- Do these disclosures include a description of issues and gaps, along with actions to mitigate them?
- How do you ensure that financial statements are accurate and complete, with the most up-to-date data?
- Does the board clearly understand the company’s risk management framework?
4. Compliance and enforcement
Even with the FRC offering ongoing guidance, navigating the UK Corporate Governance Code can get complicated. For example, disclosure requirements for corporate governance arrangements overlap with the listing rules of the Financial Conduct Authority (FCA), which has its own handbook.
Important things to check include:
- Your annual report’s compliance with both the FCA Listing Rules and the UK Corporate Governance Code
- Making sure your disclosures include a statement on how your company has applied the UK Corporate Governance Code
Implementing the UK Corporate Governance Code
For UK-listed companies, the 2024 UK Corporate Governance Code adds more responsibilities to an already crowded board and compliance agenda. You have even more moving parts to keep track of, with looming deadlines and high stakes for getting it right.
The right software can make these activities more efficient and effective.
Review and implement the UK Corporate Governance Code with technology that:
- Centralizes and automates controls testing and workflows
- Makes evaluations easy through one-stop digital surveys and questionnaires
- Pulls data from all business applications into a single source of truth
Achieve better insights and oversight with:
- A secure mobile-friendly digital portal for real-time board collaboration
- Market intelligence on executive compensation, shareholder pressures, ESG, and more
- A consolidated view of risk across the organisation, with tools for curating, contextualising, and reporting these insights
See how Diligent can streamline and strengthen your UK Corporate Governance Code efforts: Diligent for internal controls and risk management, Diligent for board and leadership collaboration and Diligent One, the platform that brings it all together.
