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UK Corporate Governance Code

 UK Corporate Governance Code (formerly the Combined Code) sets out standards of good practice in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders.

All companies with a Premium Listing of equity shares in the UK are required under the Listing Rules to report on how they have applied the Code in their annual report and accounts. The relevant section of the Listing Rules can be found at:

The Code contains broad principles and more specific provisions. Listed companies are required to report on how they have applied the main principles of the Code, and either to confirm that they have complied with the Code's provisions or - where they have not - to provide an explanation. Some of the provisions of the Code require disclosures to be made in order to comply with them. These are summarised in Schedule B to the Code.

The new edition of the Code was published in September 2012 and applies to reporting periods beginning on or 1 October 2012. 

Companies reporting on reporting periods beginning before 1 October 2012 should continue to report against the June 2010 edition of the  Code, although they are encouraged to consider whether it would be beneficial to adopt some or all of the new provisions in the revised code earlier than formally expected.

The FRC also publishes guidance to boards and board committees to assist them in considering how to apply the Code to their particular circumstances. There are different pieces of guidance addressing board effectiveness, the role of the audit committee, risk management and internal control and going concern and financial reporting. 

The Code and guidance can be downloaded from this website. Printed copies can be obtained free of charge from FRC publications, tel: 020 8247 1264, email: and online at:

2012 changes to the Code

The revised Code issued in September 2012 follows a consultation exercise seeking views on whether to amend the UK Corporate Governance Code and the associated  Guidance on Audit Committees.

The differences between the 2010 and 2012 editions of the Code are summarised in the Appendix to the  feedback statement on that consulation.

Click here to view the Consultation document and responses to the consultation.

The revised Code also incorporates changes originally announced in October 2011 following consultation on whether it intended to amend the UK Corporate Governance Code to require companies to publish their policy on boardroom diversity and report against it annually, as recommended by Lord Davies in his ‘Women on Boards' report published in February 2011.

 Consultation Document: Gender Diversity on Boards (May 2011)

 Feedback Statement: Gender Diversity on Boards (October 2011)

Click here to view the responses to the consultation exercise.

Audit Tendering

One of the new provisions in the 2012 edition of the Code states that FTSE 350 companies should put the external audit contract out to tender at least every ten years.

The FRC recognises that the audit market could be disrupted if a large number of companies chose to go out to tender in the first year in which the revised Code applied. When consulting on the proposal, the FRC therefore put forward some possible transitional arrangements. These were broadly endorsed and are set out below.

The suggested transitional arrangements are not binding. Companies should put the audit contract out to tender earlier than they would be expected to under these arrangements if they feel it is appropriate to do so, and shareholders should feel free to request them to do so. Equally, as with all other provisions of the Code, companies can choose not to comply and explain why not. Whatever their decision, the FRC would encourage companies to state when they first report against the 2012 Code whether or not they anticipate putting the audit contract out to tender in due course.

The FRC suggested that the timing of tenders might be aligned with both the cycle for rotating the audit engagement partner and the length of time since the audit contract was previously put out to tender.  The FRC suggested that where a company has put the audit contract out to tender or changed audit firm in or after 2000, the tender process might be deferred until the latter stages of the incoming audit engagement partner’s term (in other words, for a further five years).

So, for example, under these suggested arrangements, if the current audit partner was due to complete their five year period in 2014 the company would carry out a tender in time for the successful audit firm (which could be the incumbent firm) to take up their appointment when that partner steps down. However if the company had carried out a tender or changed audit firm more recently than 2000, this could be deferred until the next partner rotation in 2019.  


It is important that companies provide clear and meaningful explanations when they choose not to apply one of the provisions of the Code, so that their shareholders can understand the reasons for doing so and judge whether they are content with the approach the company has taken.

In February 2012 the FRC published a paper titled  What Constitutes an Explanation under 'Comply or Explain'? which identified a number of features of a meaningful explanation.  These included, for example, providing a clear rationale for the action taken and describing any mitigating actions.

These features have now been incorporated  in the introductory section of the 2012 edition of the Code.  The FRC believes that it will be helpful for companies to understand what is expected of them and for shareholders to have a benchmark against which to assess explanations.


In December 2011 the FRC published a report called  Developments in Corporate Governance 2011. This was the first of what is intended to be a series of annual reports on the impact and implementation of the UK Corporate Governance and Stewardship Codes. The 2012 report is available here, and the next report is scheduled to be published in December 2013.
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