FRC update on Governance Code consultation

The Financial Reporting Council (FRC) has issued an update on the consultation it conducted earlier this year, on changes to the UK Corporate Governance Code and says that it will only be taking forward a “small number of the original 18 proposals” contained in its consultation paper, including in relation to internal controls.

The consultation, which ran from May to September this year, was part of a package of measures to implement the proposals from the government’s March 2021 white paper on audit and corporate governance reform, Restoring trust in audit and corporate governance (see our blog post here). The extent of the proposed changes was thrown into doubt when the government withdrew the draft Companies (Strategic Report and Directors’ Report) (Amendment) Regulations 2023 in October (see our blog post here), and again earlier this month when the King’s Speech did not include an audit and corporate governance reform bill.

The FRC says that it has considered the feedback it has received and, in light of that and the wider debate about business reporting requirements, it will only be taking forward a small number of the proposals contained in its consultation paper and that it will “stop development of the remainder”. The key changes being progressed relate to the internal controls provisions in the Governance Code, which were a central part of the consultation (see our briefing for further details on the consultation). However, there will be modifications to the proposals set out in the consultation, to ensure that the provisions are “targeted and proportionate”.

The FRC intends to publish the revised Governance Code in January 2024. It says it will review the guidance associated with the Governance Code, and the Stewardship Code, next year.