The anticipated Financial Reporting Council (FRC) publication of the UK Corporate Governance Code 2024 (the “2024 Code”) occurred in January 2024.
Susan Fadil, Senior Director – Fund & Corporate Services, examines the latest update:
The 2024 Code’s emphasis on internal controls, as well as the addition of a new requirement under Provision 29 for the board to declare its effectiveness in relation to material controls, are significant updates. Provision 29 requires boards to monitor their companies’ risk management and internal control frameworks and conduct an annual review of their effectiveness. Companies must also report on how the board monitored and reviewed the framework’s effectiveness, make a declaration of the effectiveness of material internal controls, and describe any controls that did not operate effectively in their annual report. Much of this is already undertaken by boards as it is already in Provision 29 of the 2018 UK Corporate Governance Code, but the proposal for a board declaration is new.
Additional changes include expanded reporting on corporate culture and Audit Committee responsibilities in accordance with the Minimum Standard: Audit Committees and the External Audit (Minimum Standard).
The FRC has also published guidance to assist companies in applying the updates included in the 2024 Code. The guidance provides examples of best practices to assist boards implement the Code’s Principles and Provisions, with the objective of stimulating decision-making rather than being prescriptive.
The FRC has maintained the established principle of ‘comply or explain’ which has retained the ability for companies to assess the principles and provisions of the 2024 Code and, where relevant, explain where a company has diverged from the 2024 Code.
The 2024 Code applies to accounting periods beginning on or after 1 January 2025, with the exception of Provision 29, which applies to accounting periods beginning after 1 January 2026.
The Association of Investment Companies (AIC) has welcomed the final amendments to the 2024 Code and confirmed that it will review these changes, and where appropriate, update the AIC Code of Corporate Governance.
The 2024 Code is more proportionate than the FRC’s original proposals, which included provisions on audit and assurance policies, resilience statements, over-boarding, and additional provisions on committee chairs’ engagement with shareholders. These have now been dropped.
JTC is actively reviewing the terms of reference for our client’s Committee’s, particularly their Audit Committee, in order to make appropriate updates in response to the 2024 Code. We will make appropriate recommendations to our clients and monitor for any subsequent updates to the AIC Code.
If you have any questions about the 2024 Code and how JTC can help, please contact: [email protected]
- The full 2024 Code can be found here: UK Corporate Governance Code 2024 (frc.org.uk)
- The associated guidance to the 2024 Code can be found here: Corporate Governance Code Guidance (frc.org.uk)
- A summary of the key changes in the 2024 Code is here: UK Corporate Governance Code 2024 Key Changes (frc.org.uk)
