Member Article

The Financial Reporting Council (FRC) has commenced consultation on the reviewed UK Corporate Governance Code. The Code, which sets out good practice for UK listed companies across a range of issues, is routinely reviewed every two years.

If implemented, the proposed amendments to the Code would require companies to:

• place greater emphasis on ensuring that remuneration policies focus on long-term success;
• put in place arrangements allowing them to recover or withhold variable pay, as appropriate, and to consider appropriate vesting and holding periods for deferred remuneration;
• explain when publishing AGM results how they intend to deal with a significant shareholder vote against any resolution;
• state in their financial statements whether it is appropriate to adopt a going concern basis of accounting and any material uncertainties about the continued ability to do so;
• robustly assess their principal risks and explain how they are to be managed and mitigated;
• state whether they believe they will be able to continue in operation and meet their liabilities taking account of current position and principal risks, and what period of time this assessment applies to; and
• monitor their risk management and internal control system and carry out a review (at least annually) of their effectiveness and report on such review in the annual report.

In accordance with the spirit of the Code overall, companies will be required to comply with the updated Code or explain why they have not done so. The consultation will close on Friday 27 June 2014. The proposed changes, subject to the outcome of the consultation, are intended to apply to financial years beginning on or after 1 October 2014.

A copy of the consultation document can be found here.