Corporate governance – FCA consultation on changes to the UKLRs and DTRs to reflect the new UK Corporate Governance Code

The Financial Conduct Authority (FCA) has published a consultation page (CP24/26) which includes proposed changes to the UK Listing Rules (UKLRs) and the DTRs to reflect the new 2024 UK Corporate Governance Code.

The 2024 version of the Code was adopted by the Financial Reporting Council (FRC) in January 2024 to replace the previous 2018 version. It will apply to financial years beginning on or after 1 January 2025 (except for provision 29 which applies to financial years beginning on or after 1 January 2026). The FRC also updated the guidance which supports the Code. For more details on the 2024 Code, see our snapshot here.

Current UKLR and DTR requirements in relation to the Governance Code

Like the 2018 version, the 2024 Code applies on a “comply or explain” basis. Under the UKLRs, in their annual report companies listed in the Equity Shares (Commercial Companies) (ESCC) category are required to state:

• how they have applied the principles of the Code;
• how they have complied with the provisions of the Code, or where they have not complied with any of the provisions, to explain why not;
• the appropriateness of adopting a going concern basis of accounting (in line with provision 30 of the Code); and
• the directors’ assessment of the viability of the company (in line with provision 31 of the Code).

The statements made in relation to provisions 30 and 31 are required to be prepared in accordance with the FRC guidance.

In-scope issuers are also required under DTR 7 to include certain disclosures about their corporate governance and audit arrangements in their directors’ report. DTR 7.1 and 7.2 both cross-refer to specific provisions of the 2018 Code and the FRC guidance.

FCA consultation

The FCA’s proposed changes update the rules to refer to the 2024 Code. They also remove the requirements in the UKLRs and DTRs to prepare the necessary disclosures in line with the FRC guidance. The FCA notes that the guidance is not intended to be prescriptive and so, under the FCA’s proposals, the UKLRs and DTRs will instead just note the availability of the guidance.

CP 24/26 closes for comments on 13 January 2025 and the FCA intends then to finalise the rules as soon as possible. Once the final changes are published, the FCA is proposing that they will come into effect on the day following publication.