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Shearman & Sterling LLP U.K. Corporate Governance Developments | 58 The past year has seen several noteworthy developments impacting U.K. corporate governance. It has also seen the withdrawal by the U.K. Government of the big corporate reporting reforms that it announced following its 2021 Restoring Trust in Audit and Corporate Governance white paper and which we have discussed in prior years' Surveys. In this article we briefly discuss a selection of these developments, including reforms which are still expected to take place, starting with the most recent one—a formal review of the 2018 edition of the U.K. Corporate Governance Code. U.K. CORPORATE GOVERNANCE CODE In May 2023, the Financial Reporting Council (FRC), which is the U.K.'s independent corporate governance regulator in charge of publishing and periodically reviewing the U.K. Corporate Governance Code (the "Code"), launched a review of the Code. The U.K.'s Listing Rules currently require "premium" listed issuers to report against the Code on a "comply or explain" basis. Issuers who opt for a less demanding "standard" listing or who are traded on other markets, may also choose to report against the Code. If the proposed merger of the premium and standard listing segments mentioned below is introduced, the Code will likely be extended in its application to all equity issuers listed in the United Kingdom. It might have been thought that this would be the last review of the Code that the FRC in its current form would be conducting since the U.K. Government had confirmed plans—as part of its "Restoring Trust" reforms mentioned above—to replace the FRC with a more powerful audit, corporate reporting, and governance regulator, to be called the Audit, Reporting & Governance Authority (ARGA). However, since the U.K. Government has not, in its final year of legislative activity, decided to table the necessary legislation to set up ARGA, the FRC is likely to continue for some time yet to have responsibility for reviewing and monitoring the operation of the Code. The FRC's review had in part been prompted by the Government's request for the FRC to look at certain provisions of the Code—including risk management and internal controls reporting and malus and clawback for directors—that were highlighted in the Government's "Restoring Trust" reforms. However, following the withdrawal by the U.K. Government of draft legislation that would have introduced new statutory corporate reporting requirements as part of those "Restoring Trust" reforms (see below), the FRC recently announced a big scaling back of the changes to the Code it had initially proposed in its review. The most important change that the FRC intends to retain in the new Code is an enhanced risk management and internal controls reporting provision. This will require annual reports to contain an express declaration from the board whether the company's risk management and internal control systems have been effective and explain the basis for this confirmation (including how the systems have been monitored and reviewed). A number of other revisions—e.g., removing duplication from the Code—will also be taken forward but over half of the other changes will not be. These include additional responsibilities for audit committees, diversity disclosures, over-boarding and committee chairs' engagement with shareholders etc., and, of course, those based on the proposed statutory corporate reporting that has now been withdrawn. The revised Code is expected to appear in January 2024 and will apply to financial years starting on or after January 1, 2025. 1 Insights U.K. Corporate Governance Developments Maegen Morrison, Karla Dudek, and Michael Scargill 1 See Shearman & Sterling LLP, "FRC Scales Back 2024 Corporate Governance Code Revision," https://www.shearman.com/en/ perspectives/passle/102is96/frc-scales-back-2024-corporate- governance-code-revision (November 10, 2023).