The Financial Reporting Council (FRC) has released new Guidance to support the 2024 UK Corporate Governance Code (the Code) which was launched earlier this month and will apply to financial years beginning on or after 1 January 2025 (with provisions regarding internal controls applying from 1 January 2026).  The Code applies, on a “comply or explain” basis, to companies with a premium listing on the LSE.  Companies listed on Euronext Dublin are required to comply with the Code together with the Irish Corporate Governance Annex.

The new guidance consolidates previous FRC publications (Guidance on Board Effectiveness, Guidance on Audit Committees and Guidance on Risk Management and Related Financial and Business Reporting). The guidance is not mandatory, is not part of the Code itself and is not prescriptive. It contains suggestions of good practice to support those applying the Code.

The guidance is split into sections which align with the Code:

• Board Leadership and Company Purpose – board decision-making, culture, engagement with shareholders and stakeholders and the importance and benefits of reporting on outcomes.
• Division of Responsibilities – different roles within the board and the importance of each in achieving good governance.
• Composition, Succession and Evaluation – having a breadth and depths of skills and perspectives on the board, suggestions related to recruitment and talent pipelines and approaches to diversity and inclusion.  The guidance also covers the importance of, and approach to, board performance reviews.
• Audit, Risk and Internal Controls:
  • Audit – the guidance should be read in conjunction with the audit committee minimum standard;
  • Risk Management – the guidance does not set out specific procedures and acknowledges that risk appetite will differ on a company and sectoral basis; and
  • Internal Controls – in relation to the new Code requirement for boards to monitor and review all material controls and make a declaration on their effectiveness, the guidance does not establish a framework that companies should follow, or define “material control”.
• Remuneration – includes the role of the remuneration committee and the use of discretion and malus and clawback provisions.

The guidance also includes a new section covering good practice for the successful management of board committees.