Overview

• UK's Financial Reporting Council (FRC) has introduced new governance rules for company directors, requiring them to annually sign off on the effectiveness of their companies’ internal controls.
• The changes, which are a watered-down version of the original proposals, are set to take effect in 2026.
• The FRC has emphasized the 'comply or explain' principle, allowing firms to deviate from strict adherence to the rules if they can justify their actions.
• The FRC dropped plans to give auditing committees new responsibility over environment, social and governance issues, and scrapped proposals for diversity and inclusion reporting.
• The new rules are seen as a response to past corporate failures and scandals, aiming to enhance accountability and transparency within companies.