Code

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• Corporate governance


  The system by which companies are directed and controlled. Boards of directors are responsible for the governance of their companies. The shareholders' role in governance is to appoint the directors and the auditors and to satisfy themselves that an appropriate governance structure is in place.
• Companies do not exist in isolation. Successful and sustainable businesses underpin our economy and society by providing employment and creating prosperity.
• Company culture


  Should promote integrity and openness, value diversity and be responsive to the views of shareholders and wider stakeholders.
• The 2024 revision of the Code addresses the important issue of internal controls.
• Comply or explain


  The Code offers flexibility through 'comply or explain' reporting against the Provisions.
• Reporting on the new internal controls provision (Provision 29) will not be effective before accounting periods beginning on or after 1 January 2026.
• The Code does not set out a rigid set of rules; instead, it offers flexibility through 'comply or explain' reporting against the Provisions.
• The Code's success relies on companies, investors and a wide range of stakeholders engaging to improve the quality of governance and stewardship, and embracing the flexibility offered by the Code.
• The FCA's Listing Rules require companies to make a statement of how they have applied the Principles in a manner that would enable shareholders to evaluate how the Principles have been applied.
• Reporting should cover the application of the Principles in the context of the particular circumstances of the company, including how the board has set the company's purpose and strategy, met objectives, and achieved outcomes through the decisions it has taken.
• Explanations should set out the background, provide a clear rationale for the action the company is taking and explain the impact that the action has had.
• Investors should engage constructively and discuss with the company any departures from recommended practice.
• The Guidance does not set out the 'right way' to apply the Code. It is intended to stimulate thinking on how boards can carry out their role most effectively.
• The 2024 Code applies to accounting periods beginning on or after 1 January 2025, with the exception of Provision 29 which is applicable for accounting periods beginning on or after 1 January 2026.
• For parent companies with a premium listing, the board should ensure that there is adequate co-operation within the group to enable it to discharge its governance responsibilities under the Code effectively.
• Externally managed investment companies may wish to use the Association of Investment Companies' Corporate Governance Code to meet their obligations under the Code.
• The Association of Financial Mutuals produces an annotated version of the Code for mutual insurers to use.
• The board should understand the views of the company's other key stakeholders and describe in the annual report how these and the matters set out in section 172 of the Companies Act 2006 have been considered in board discussions and decision-making. The board should keep engagement mechanisms under review so that they remain effective.
• Methods for engagement with the workforce


  • A director appointed from the workforce
  • A formal workforce advisory panel
  • A designated non-executive director
• If the board has not chosen one or more of these methods, it should explain what alternative arrangements are in place and why it considers that they are effective.
• There should be a means for the workforce to raise concerns in confidence and – if they wish – anonymously. The board should routinely review these arrangements and the reports arising from their operation. It should ensure that arrangements are in place for the proportionate and independent investigation of such matters and for follow-up action.
• The board should take action to identify and manage conflicts of interest, including those resulting from significant shareholdings, and ensure that the influence of third parties does not compromise or override independent judgement.
• Where directors have concerns about the operation of the board or the management of the company that cannot be resolved, their concerns should be recorded in the board minutes. On resignation, a non-executive director should provide a written statement to the chair, for circulation to the board, if they have any such concerns.
• Chair


  Leads the board and is responsible for its overall effectiveness in directing the company. They should demonstrate objective judgement throughout their tenure and promote a culture of openness and debate. They facilitate constructive board relations and the effective contribution of all non-executive directors, and ensure that directors receive accurate, timely and clear information.
• Board composition


  Should include an appropriate combination of executive and non-executive (and, in particular, independent non-executive) directors, such that no one individual or small group of individuals dominates the board's decision making. There should be a clear division of responsibilities between the leadership of the board and the executive leadership of the company's business.
• Non-executive directors


  Should have sufficient time to meet their board responsibilities. They should provide constructive challenge, strategic guidance, offer specialist advice and hold management to account.
• Board support


  The board, supported by the company secretary, should ensure that it has the policies, processes, information, time and resources it needs in order to function effectively and efficiently.
• The chair should be independent on appointment when assessed against the circumstances set out in Provision 10. The roles of chair and chief executive should not be exercised by the same individual. A chief executive should not become chair of the same company. If, exceptionally, this is proposed by the board, major shareholders should be consulted ahead of appointment. The board should set out its reasons to all shareholders at the time of the appointment and also publish these on the company website.
• Circumstances which are likely to impair, or could appear to impair, a non-executive director's independence

  • Is or has been an employee of the company or group within the last five years
  • Has, or has had within the last three years, a material business relationship with the company, either directly or as a partner, shareholder, director or senior employee of a body that has such a relationship with the company
  • Has received or receives additional remuneration from the company apart from a director's fee, participates in the company's share option or a performance-related pay scheme, or is a member of the company's pension scheme
  • Has close family ties with any of the company's advisers, directors or senior employees
  • Holds cross-directorships or has significant links with other directors through involvement in other companies or bodies
  • Represents a significant shareholder
  • Has served on the board for more than nine years from the date of their first appointment
• At least half the board, excluding the chair, should be non-executive directors whom the board considers to be independent.
• The board should appoint one of the independent non-executive directors to be the senior independent director to provide a sounding board for the chair and serve as an intermediary for the other directors and shareholders. Led by the senior independent director, the non-executive directors should meet without the chair present at least annually to appraise the chair's performance, and on other occasions as necessary.
• Non-executive directors have a prime role in appointing and removing executive directors. Non-executive directors should scrutinise and hold to account the performance of management and individual executive directors against agreed performance objectives. The chair should hold meetings with the non-executive directors without the executive directors present.
• The responsibilities of the chair, chief executive, senior independent director, board and committees should be clear, set out in writing, agreed by the board and made publicly available. The annual report should set out the number of meetings of the board and its committees, and the individual attendance by directors.
• When making new appointments, the board should take into account other demands on directors' time. Prior to appointment, significant commitments should be disclosed with an indication of the time involved. Additional external appointments should not be undertaken without prior approval of the board, with the reasons for permitting significant appointments explained in the annual report. Full-time executive directors should not take on more than one non-executive directorship in a FTSE 100 company or other significant appointment.
• All directors should have access to the advice of the company secretary, who is responsible for advising the board on all governance matters. Both the appointment and removal of the company secretary should be a matter for the whole board.
• The board should establish a nomination committee to lead the process for appointments, ensure plans are in place for orderly succession to both the board and senior management positions, and oversee the development of a diverse pipeline for succession. A majority of members of the committee should be independent non-executive directors. The chair of the board should not chair the committee when it is dealing with the appointment of their successor.
• All directors should be subject to annual re-election. The board should set out in the papers accompanying the resolutions to elect each director the specific reasons why their contribution is, and continues to be, important to the company's long-term sustainable success.
• The chair should not remain in post beyond nine years from the date of their first appointment to the board. To facilitate effective succession planning and the development of a diverse board, this period can be extended for a limited time, particularly in those cases where the chair was an existing non-executive director on appointment. A clear explanation should be provided.