A review of the revised UK Corporate Governance Code

Tina Whitington Date published: Mar 05, 24

On January 22, 2024, the Financial Reporting Council (FRC) issued its revised UK Corporate Governance Code (Code).  Although there were only a small number of changes from the code issued in 2018, there are a few key points worth being aware of.  The revised code is effective for periods beginning on or after January 1, 2025, other than provision 29 which is effective for periods beginning on or after January 1, 2026.

What changes have been made to the code for 2024?

The previous provision 29 required that the board should monitor the company’s risk management and internal control systems and, at least annually, carry out a review of their effectiveness and report on that review in the annual report. The monitoring and review should cover all material controls, including financial, operational and compliance controls.  This has now been expanded upon to also require the following in the annual report:

• A description of how the board has monitored and reviewed the effectiveness of the framework
• A declaration of effectiveness of the material controls as at the balance sheet date
• A description of any material controls which have not operated effectively as at the balance sheet date, the action taken, or proposed, to improve them and any action taken to address previously reported issues

This aims to strengthen board accountability for the effectiveness of the risk and internal control framework, whilst also covering material controls and the board's approach to these.

Where the board is asked to describe the work of the audit committee in the annual report, the detail has now been removed and replaced with a reference to the Audit Committees and External Audit Minimum Standard.  This standard was issued in May 2023 as a direct response to the government’s consultation on restoring trust in audit and corporate governance.  It was designed to enhance performance and ensure a consistent approach across audit committees by setting out clear expectations and guidelines.

The code has expanded on the reporting of directors’ remuneration and now includes the need for a description of the malus and clawback provisions, including:

• The circumstances in which malus and clawback provisions could be used
• A description of the period for malus and clawback and why the selected period is best suited to the organization
• Whether the provisions were used in the last reporting period

If so, a clear explanation of the reason should be provided in the annual report. This is all part of the FRC's push to enhance performance and promote a consistent approach across audit committees.

Learn more

If you are interested in learning more about the UK Corporate Governance Code, read our report ‘Navigating assurance: unveiling section 4 of the UK Corporate Governance Code’.

Read now