The Combined Code on Corporate Governance sets out standards of good practice in relation to issues such as board composition and development, remuneration, accountability and audit and relations with shareholders.
All companies incorporated in the UK and listed on the Main Market of the London Stock Exchange are required under the Listing Rules to report on how they have applied the Combined Code in their annual report and accounts. Overseas companies listed on the Main Market are required to disclose the significant ways in which their corporate governance practices differ from those set out in the Code.
The Combined 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.
Current versions of the Combined Code
The Combined Code was first issued in 1998 and has been updated at regular intervals since then. At present two versions are in effect: the 2006 edition, which applies to accounting periods beginning on or after 1 November 2006; and the June 2008 edition which applies to applies to accounting periods beginning on or after 29 June 2008.
Combined Code June 2006 (178kb)
Combined Code June 2008 (417kb)
Printed copies of both editions can be obtained free of charge from FRC publications, tel: 020 8247 1264, email: customer.services@cch.co.uk and online at: www.frcpublications.com
The June 2008 edition incorporates changes made following a review of the impact and effectiveness of the Code held during 2007. Documents associated with the 2007 review can be found here
The changes:
- remove the restriction on an individual chairing more than one FTSE 100 company; and
- for listed companies outside the FTSE 350, allow the company chairman to sit on the audit committee where he or she was considered independent on appointment.
The June 2008 edition of the Code took effect at the same time as new FSA Corporate Governance Rules implementing EU requirements relating to corporate governance statements and audit committees. There is some overlap between the Rules and the Code, which is summarised in the Schedule tom the Code. The full Rules can be found on the FSA website.
Associated guidance
The Turnbull guidance, which provides guidance to companies on how to apply the section of the Combined Code dealing with internal control (section C.2), can be found at www.frc.org.uk/corporate/internalcontrol.cfm
In addition the Higgs and Smith reports contained best practice guidance relating to non-executive directors and audit committees respectively. While company boards are not required to follow this guidance, it is intended to assist boards when implementing the relevant provisions of the Code.
The Smith Guidance on Audit Committees (120kb)
Suggestions for good practice from the Higgs Report (118kb)
As a result of the recommendations of the Market Participants Group looking at choice in the audit market, the FRC has recently consulted on possible amendments to the Smith guidance. Consultation ends on 6 June 2008, and the consultation document can be found here. Responses to the consultation are still being considered, and the outcome will be announced as soon as possible.
