The revised Code contains relatively minor updates, with the main change being a need for Boards to include a declaration in the annual report explaining how they have monitored and reviewed all material internal controls, and their conclusions from this review process.
This follows a November announcement from the FRC that several more substantial additions and changes were no longer being taken forward. These included those relating to the role of audit committees on ESG and modifications to existing Code provisions around diversity, over-boarding, and Committee Chairs engaging with shareholders.
The decision to water down the original proposals follows on from the government’s decision last year to cancel related legislation – the first statutory instrument to be withdrawn in 35 years – which would have introduced the requirement for a ‘resilience statement’. This was to build on and combine the viability and going concern statements and principal risks and uncertainties.
In addition to the requirements added around internal controls, other changes include a need for Boards to not only assess and monitor culture, but also report on how it has been embedded. Boards are also asked to disclose ‘clawback’ arrangements regarding Directors’ remuneration.
The smaller new Code provisions will be effective from 1 January 2025 (appearing in reports published from 2026), with the Board declaration on internal control monitoring and review required from 1 January 2026 (appearing in reports published from 2027).
Guidance to accompany the new Code is also available.
If you need any guidance on what these changes mean for your reporting, please get in touch with the Friend team.
