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Governance Authority
Category: Governance Codes and Frameworks

UK Corporate Governance Code

Also known as: UKCGC, the Code, Combined Code
Simply put

The UK Corporate Governance Code is a framework issued by the Financial Reporting Council (FRC) that sets out standards of good practice for how companies, particularly listed companies, should be led and overseen. It covers areas such as board leadership, the division of responsibilities, board composition and succession, audit, and internal controls. It describes recommended practices rather than binding law, and how it applies to a given company depends on that company's listing status and circumstances.

Formal definition

The UK Corporate Governance Code is a principles-based framework maintained by the Financial Reporting Council (FRC) that articulates standards of good practice for board leadership, governance structures, and disclosure. The 2024 Code is organised into five sections: Board Leadership and Company Purpose; Division of Responsibilities; Composition, Succession and Evaluation; Audit, Risk and Internal Control; and Remuneration; the 2024 revision was a limited update that in particular addressed internal controls. Formerly known as the Combined Code, it is generally applied by listed companies and typically operates on a 'comply or explain' basis rather than as prescriptive statutory rule, though its precise application and enforcement mechanism depend on a company's listing status and the applicable listing rules. This entry is educational and does not constitute legal, audit, or compliance advice; practitioners should consult the current Code text and relevant listing requirements for authoritative provisions.

Why it matters

The UK Corporate Governance Code is a central reference point for how UK listed companies are led and held to account. Because it operates on a 'comply or explain' basis rather than as prescriptive statutory rule, it sets an expectation of good practice while allowing companies flexibility to depart from specific provisions where they can explain their reasoning. This structure places the burden on boards to articulate and justify their governance choices publicly, which in turn gives investors and other stakeholders a framework against which to assess board leadership, the division of responsibilities, board composition, audit, and remuneration.

The Code matters because it shapes the behaviour and disclosure of companies that are significant to markets and the wider economy, even though it is not itself binding law. Its influence is greatest where a company's listing status and the applicable listing rules give the 'comply or explain' mechanism practical effect. The 2024 revision was a limited update that in particular addressed internal controls, signalling continued regulatory attention to how boards oversee the systems that safeguard company operations and reporting.

Because how the Code applies depends on a company's listing status and circumstances, its practical significance varies from one entity to another. This entry is educational and does not constitute legal, audit, or compliance advice; companies and their advisers should consult the current Code text and the relevant listing requirements to determine what applies to them.

Who it's relevant to

Boards and directors of listed companies
The Code speaks directly to how boards lead and oversee their companies, addressing board leadership, the division of responsibilities, and composition, succession and evaluation. Directors are typically responsible for determining whether to comply with the Code's provisions or to explain any departures, and for the governance disclosures that flow from that judgment.
Company secretaries and governance professionals
Those who support boards generally coordinate the practical application of the Code, including how the company reports against its provisions on a 'comply or explain' basis. They typically track the current Code text and how it interacts with the applicable listing rules to help ensure disclosures are accurate and defensible.
Audit and risk committees
The 2024 Code includes a section on Audit, Risk and Internal Control, and the 2024 revision in particular addressed internal controls. Members of audit and risk committees are relevant audiences because they generally oversee the areas the Code addresses in this section, though the specific responsibilities depend on the company's own governance arrangements.
Investors and other stakeholders
The Code provides a recognised benchmark against which investors and other stakeholders can assess a company's governance and disclosures. Because it operates on a 'comply or explain' basis, these audiences typically use the company's explanations, rather than uniform compliance alone, to inform their assessment of board leadership and accountability.

Inside UKCGC

Comply-or-Explain Approach
The Code operates on a principles-based, comply-or-explain basis rather than as binding statute. Companies subject to it are generally expected either to apply its provisions or to explain in their annual reporting why an alternative approach is appropriate to their circumstances. This distinguishes it from prescriptive, rules-based regulation.
Board Leadership and Company Purpose
Provisions addressing the role of the board in promoting long-term sustainable success, establishing purpose, values, and culture, and aligning these with strategy. This area typically speaks to the board's collective oversight responsibilities rather than day-to-day management activities.
Division of Responsibilities
Guidance on the separation between the roles of chair and chief executive, the composition and independence of the board, and the balance between executive and non-executive directors. It generally emphasises that no individual should have unfettered decision-making power.
Composition, Succession and Evaluation
Provisions covering board appointments, succession planning, diversity considerations, and periodic evaluation of board effectiveness. These are framed as expectations of practice rather than legal obligations.
Audit, Risk and Internal Control
Guidance on the responsibilities of the audit committee, the relationship with external and internal audit, and the board's responsibility for establishing procedures to manage risk and oversee the internal control framework. Oversight sits with the board and its committees, while operation of controls typically rests with management.
Remuneration
Provisions on aligning executive remuneration with company purpose, strategy, and long-term performance, and on the role of the remuneration committee in setting and reviewing pay policy independently.

Common questions

Answers to the questions practitioners most commonly ask about UKCGC.

Is the UK Corporate Governance Code a law that companies must obey?
No. The Code is not a statute or regulation and does not impose binding legal obligations in the way that primary legislation does. It operates on a 'comply or explain' basis, which is given effect through the Listing Rules for companies with a premium listing. Under this approach, a company either applies a provision of the Code or explains why it has departed from it. The explanation itself is expected to be meaningful, but the choice to deviate, when properly justified, is contemplated by the framework. Whether and how the Code applies depends on the entity's listing status, and companies should confirm their specific obligations by reference to the applicable rules and their own advisers, as this entry is educational and not legal advice.
Does the Code apply to every UK company?
No. The Code does not apply universally to all UK companies. Its application is generally tied to companies with a premium listing on the relevant market, as directed through the Listing Rules; many private companies, smaller entities, and companies with other listing categories are not directly subject to it, though some may choose to draw on it voluntarily or may be subject to separate governance expectations. Because scope depends on entity type, listing status, and applicable rules, a company should verify whether the Code applies to its particular circumstances rather than assume it does or does not.
How does a board decide whether to comply with a Code provision or explain a departure?
Under the 'comply or explain' approach, the board typically considers whether applying a given provision serves the company's circumstances and its stakeholders, and where it chooses to depart, it is generally expected to set out a clear, specific explanation of the reasons, any alternative arrangements, and how these achieve the underlying objective. The decision sits with the board as a matter of oversight and judgment, informed by management and, where relevant, advisers. This is a judgment exercise that depends on the company's facts, and the quality of the explanation is often as important to investors as the decision itself.
Where in the annual report is compliance with the Code usually addressed?
Companies within scope generally include a corporate governance statement or section within the annual report that describes how they have applied the Code's principles and states whether they have complied with its provisions, explaining any departures. The precise presentation and required disclosures depend on the applicable rules and reporting requirements in force at the time, so companies should confirm current expectations rather than rely on a fixed format. This entry does not set out the specific content requirements, which may change and vary by circumstance.
What is the role of the board versus its committees in giving effect to the Code?
The board typically holds overall responsibility for governance and for the company's approach to the Code, including setting direction and overseeing culture and effectiveness. Certain functions are generally delegated to committees, such as an audit committee, remuneration committee, and nomination committee, each with a defined remit. Management is generally responsible for implementing decisions and for day-to-day operations, while the board and its committees retain the oversight role. The specific allocation of responsibilities should be documented in the company's terms of reference and governance arrangements, and the appropriate structure depends on the entity's size, complexity, and circumstances.
How should a company handle a departure from a Code provision so that investors find it credible?
A credible departure generally rests on an explanation that is specific to the company rather than generic, that identifies the provision in question, the reasons for the alternative approach, the arrangements adopted instead, and, where applicable, whether the departure is time-limited. Because 'comply or explain' relies on the informativeness of the explanation, boards typically engage with shareholders and consider investor expectations when communicating a departure. What counts as an adequate explanation is a matter of judgment and stakeholder engagement, and companies should consider their own circumstances and, where appropriate, seek advice.

Common misconceptions

The UK Corporate Governance Code is legally binding law that all companies must follow.
The Code is a set of principles and provisions applied on a comply-or-explain basis, not a statute. Its formal application is generally tied to certain premium-listed companies through listing rules, and other entities may adopt it voluntarily or be outside its scope entirely. Its reach and legal force depend on entity type and the applicable regulatory regime, and departures accompanied by adequate explanation can be a legitimate response.
The Code makes the board responsible for operating internal controls and managing risk day to day.
The Code typically frames the board's role as oversight, setting risk appetite, monitoring the effectiveness of risk management and internal control, and holding management to account. The design and day-to-day operation of controls generally rest with management. Conflating board oversight with management's operational duties misstates where accountability sits.
The Code applies uniformly the same way across all jurisdictions and organisations.
The Code is a UK instrument, and its application varies by entity type and listing status even within the UK. Other jurisdictions have their own codes and frameworks. Practitioners should confirm which code, listing rules, or statutory requirements actually apply to a given entity rather than assuming universal applicability.

Best practices

Confirm whether the Code formally applies to your entity based on its listing status and type before treating its provisions as expectations, and identify any separate binding legal or listing rule requirements that sit alongside it.
Where you depart from a provision, prepare a clear, specific comply-or-explain disclosure that sets out the rationale and how the alternative approach meets the underlying principle, rather than relying on boilerplate language.
Maintain a clear division of responsibilities in writing, distinguishing board and committee oversight from management's operational duties, so accountability for risk management and internal control is unambiguous.
Ensure the audit and risk oversight arrangements clearly separate the board's monitoring role from management's ownership of control design and operation, and document how assurance is obtained.
Conduct periodic board effectiveness evaluations and succession planning reviews, and use the outputs to inform composition, independence, and reporting.
Treat the Code as one input among the applicable governance, risk, and compliance requirements, and seek qualified legal or professional advice where application to specific facts or jurisdictions is uncertain.