Following the publication in May this year of the government’s response to its consultation on audit and governance reform (see our blog post here for more details), the FRC has published a position paper setting out the steps it will take to implement the reforms outlined by the government.
In particular, the FRC intends to publish a consultation paper on changes to the UK Corporate Governance Code in the first quarter of 2023, with the expectation that the revised Governance Code will apply to financial reporting periods starting on or after 1 January 2024. The changes to the Governance Code will include enhancing the disclosures that the board is required to make in relation to the effectiveness of the company’s internal control systems and strengthening the provisions of the Governance Code that deal with the conditions for withholding executive pay.
The FRC will also consult on necessary changes to the guidance which supports the Governance Code, including its Guidance on Board Effectiveness and the Guidance for Audit Committees.
A number of the reforms set out in the government’s response will require primary and secondary legislation, the timing for which is not yet known. The FRC intends to implement the reforms through only one set of changes to the Governance Code and each standard and piece of guidance for which it is responsible, and so recognises that the timing for its consultations will ultimately be driven by the government’s legislative timetable.
We have produced a detailed briefing on the government’s response to the audit and governance consultation, which is available here.