Consensus on the Comply or Explain principle (IVOR nr. 86) 2012/4.2.6:4.2.6 How is the disclosure of the corporate governance statement arranged and who is accountable for this disclosure?

Consensus on the Comply or Explain principle (IVOR nr. 86) 2012/4.2.6

4.2.6 How is the disclosure of the corporate governance statement arranged and who is accountable for this disclosure?

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Schedule B to the UK Code 2010 extensively reviews the disclosure of corporate governance arrangements and explains that the disclosure requirements regarding the comply or explain principle in particular are set out in three places: (i) the code itself (the separate paragraph on the comply or explain principle), (ii) FSA Disclosure and Transparency Rules sub-chapter 7.2 (for issuers whose securities are admitted to trading on a regulated market) and (iii) FSA Listing Rules 9.8.6 R and 9.8.7A R (for issuers of Premium listed equity shares, also being foreign companies listed in the UK with a Premium Listing). Nowadays sub-chapters 7.2.2 to 7.2.4 state that a corporate governance statement must be included in a specific section in a directors' report, or in a separate report published together with the annual report, or by means of a reference in the directors' report to where such document is publicly available on the website. Sub-chapters 7.2.3 and 7.2.4 state that it must be mentioned which code is applied and the extent to which that corporate governance code is departed from, while explaining which parts of the corporate governance code are departed from and the reasons for doing so. Listing Rules 9.8.6 R (for UK incorporated issuers) and 9.8.7 R (for overseas incorporated issuers) state that a company with a Premium listing1 of equity shares must publish in its annual report and accounts:

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a statement of how the listed company has applied the Main Principles set out in the UK Corporate Governance Code, in a manner that would enable shareholders to evaluate how the principles have been applied;

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a statement as to whether the listed company has:

(a)

complied throughout the accounting period with all relevant provisions set out in the UK Corporate Governance Code; or

(b)

not complied throughout the accounting period with all relevant provisions set out in the UK Corporate Governance Code and if so, setting out:

(i)

those provisions, if any, it has not complied with;

(ii)

in the case of provisions whose requirements are of a continuing nature, the period within which, if any, it did not comply with some or all of those provisions; and

(iii)

the company's reasons for non-compliance.

Hence the Listing Rules are more specific than the Disclosure and Transparency Rules in addressing the UK Corporate Governance Code, requiring publication of how the Main Principles are applied and that the statement must be part of the annual report and accounts. Moreover, since the implementation of Directive 2006/46/EC the rules also apply to foreign companies listed in the UK but are limited to companies with a Premium Listing.

With respect to the responsibility and accountability for the corporate governance statement no further implementation actions were required. During the consultation period it was agreed that the director's responsibilities were already reflected in UK law (e.g. the Companies Act 2006) and therefore any further action was unnecessary (Government Response Implementation of Directive 2006/46/EC 2007).

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