The UK Corporate Governance Code and its application to share schemes
The UK Corporate Governance Code and its application to share schemes

The following Share Incentives guidance note provides comprehensive and up to date legal information covering:

  • The UK Corporate Governance Code and its application to share schemes
  • Background
  • What does the 2016 Code regulate?
  • 2016 Code—Principles relating to the levels and components of remuneration
  • Principles relating to the design of performance-related remuneration for executive directors (Schedule A to the 2016 Code)
  • 2018 Code

Background

The Financial Reporting Council (FRC) is responsible for corporate governance in the UK, and as such also has responsibility to publish and maintain a single code of good corporate governance practice. This is now known as the UK Corporate Governance Code (the Code) (formerly known as the Combined Code).

On 16 February 2017, the FRC carried out a fundamental review of the Code which took account of work done by the FRC on corporate culture and succession planning, and the issues raised in BEIS' Green Paper. As a result, on 16 July 2018, the FRC published the 2018 UK Corporate Governance Code (the 2018 Code), which was amended following consultation to produce a ‘shorter, sharper Code’. See News Analysis: FRC publishes revised UK Corporate Governance Code.

The 2018 Code is applicable to companies with accounting periods commencing on or after 1 January 2019.

The April 2016 Code (the 2016 Code) applies to companies with accounting periods beginning prior to 1 January 2019.

The provisions relating to remuneration in the 2018 Code, while now more logically presented in a single section of the Code (section 5), are not radically different from the 2016 Code. See: 2018 Code below.

Adherence to the Code is expected by institutional investor shareholders (as highlighted, for example, in the foreword to the Investment Association (IA) Principles of Remuneration).

In addition