The UK's auditing watchdog, the Financial Reporting Council (FRC), has released revised governance rules for company directors.
These adjustments to the UK corporate governance code, applicable to firms with a premium listing on the London Stock Exchange, have been scaled back from the original proposals to maintain the country's competitiveness.
One key requirement is for directors to annually approve the effectiveness of their companies' internal controls.
While only a few revisions were made compared to the 18 initially proposed, this move reflects a balancing act between the demand for improved governance rules in the wake of corporate failures like Carillion and Patisserie Valerie.
FRC boss Richard Moriarty said: “A global reputation for high standards of corporate governance is a competitive advantage for UK plc and our revised code helps this by enhancing transparency on internal controls, but in a way that is proportionate and minimises reporting burdens on businesses.
“The small, but important, change to the expectations on internal controls will better support boards asking the right questions at the right time to help them gain the level of the assurance they require and to be able to demonstrate good governance to investors to and other stakeholders”.
The changes come into effect from January 2026.
Other new requirements, including outlining malus and clawback provisions in directors' contracts, will be implemented in 2025.
The FRC dropped some proposals, such as auditing committees' responsibility for environmental, social, and governance issues, diversity and inclusion reporting, and rules on board-shareholder engagement.
The "comply or explain" principle remains, allowing large, listed companies to deviate from code requirements by providing a justified explanation.