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UK Corporate Governance Code 2026: What boards must do this year
UK Corporate Governance Code 2026: What boards must do this year to ensure strong compliance and robust governance from the get-go.
The corporate governance landscape in the United Kingdom is in a state of flux. Calls for higher standards have arrived alongside a desire to keep the UK economically competitive, which inevitably means that the governance rulebook is going to change.
The latest revisions to the UK Corporate Governance code were approved in 2024. Most new provisions came into force in January 2025. Some (particularly provision 29) were left a bit longer for bedding-in purposes, and finally came into force from January 2026.
With these updates, the Financial Reporting Council (FRC) officially shifted the burden of accountability from simple process-driven compliance. In other words: far less tick-boxing. In its place is meaningful, outcomes-based reporting.
For boards operating in 2026 and beyond, the demand for proper engagement with established governance standards has never been greater.
Moving beyond “boilerplate” compliance
The FRC has explicitly rejected any more of what it considered “boilerplate” reporting. Essentially, this means that boards simply describing their internal governance structures without giving any evidence as to how effective they are is no longer allowed.
You will likely already know the fundamental principle of the UK Corporate Governance Code: “Comply or Explain”. Designed to accommodate the lack of a one-size-fits-all rulebook, “Comply or Explain” means that any business subject to the code must comply with its provisions, but if it can’t, offering a logical explanation for it will suffice.
The revisions to the UK Governance Codeorporate Governance Code 2024, include something called Principle C. Here, the FRC gets serious about demanding “cogent, well-justified” reasoning as part of the “Comply or Explain” model. In other words, for any departures from the code, boards are to demonstrate how governance inputs translate into tangible strategic outcomes.
This will likely demand a fundamental shift for many boards, specifically the ones that might have thought that a general awareness of the code was enough. Now, they are more pressured than ever to actively test and justify their own frameworks to be in full compliance. From 2026, the imperative will be on stress-testing so that when mandatory reporting cycles begin, boards will have enough information at their disposal.
The “material controls” revolution and Provision 29
The central hub of the 2024 Code is Provision 29.
While previous regimes focused heavily on internal controls, this provision of the Corporate Governance Code Guidance expands the definition of “material controls” to include operational, compliance, and narrative reporting, including ESG data.
It also concentrates on real-time reviews. The regulator doesn’t just want to know about the existence of controls anymore. Now, they want a report on how well they’ve performed in practice through a formal declaration of effectiveness.
Practically, this requires something that should already exist in all companies, but which can be admittedly difficult in many: a unified assurance environment where silos between finance, legal, and sustainability functions are broken down to provide a holistic view of risk, and a succinct report on the same.
Embedding culture and accountability
In a similar manner, Provision 2 of the code now requires corporate leaders to actively assess and monitor culture, demonstrating, with evidence, how that culture is embedded in the organisation.
If they don’t do this, they risk increased reputational risk. Why? Because culture is increasingly seen as a driving factor of the greatest corporate performances, alongside the worst corporate scandals. It needs to be given the respect it deserves.
Furthermore, the code also takes into account new legislation, which is crucial at the board level: the Economic Crime and Corporate Transparency Act 2023.
This act is centred on combating financial crime. It introduces “failure to prevent fraud” as an offence in itself, putting more pressure on directors to be proactive in seeking out wrongdoing. The “didn’t know, but didn’t check” attitude holds far less weight under this regime. Boards must ensure that their definition of “material controls” under the code aligns with the “reasonable procedures” defence required by this legislation.
Malus, clawback, and remuneration oversight
The 2024 Code also toughens the stance on executive accountability by demanding more reporting on malus and clawback provisions. If you’re unfamiliar, malus and clawback provisions refer to pre-defined processes of reducing or cancelling executive pay in cases such as unmet targets, inaccurate reporting or outright misconduct.
While already common, remuneration committees are now mandated to include these provisions in director contracts and produce annual reports on how they were used. Again, the goal is to ensure that important safeguards don’t just exist for the sake of it, but that they actually serve a purpose when and where they’re needed.
Board implications: Your strategic roadmap for corporate governance code compliance
It’s a new era for the UK’s corporate governance code, and for boards to successfully navigate it, the priority must be to engage and to do it meaningfully. This goes especially for the practical aspects of preparation and integration of new code provisions in governance frameworks.
Define materiality early: You need to understand what your own company’s material controls are. The FRC has deliberately left its own definition vague to give your company wiggle-room, but that means you need to fill the gaps with your own reasoning. Once you’ve defined these controls, you need them on paper to foster clear communication from the start.
Establish an assurance map: These documents are vital for something like code compliance. It should plot your organisation’s key risks against external and internal sources, providing assurance, revealing gaps and overlaps, and helping you see the big picture.
Conduct “dry runs”: The period pre-2026 was an ample time for dry runs of new code provisions, but your opportunity is not lost now. Conducting dry runs allows your board to identify control failures in a safe environment and test its appetite for transparency and remediation.
Update board charters: Go through your governance documents and terms of reference, because they should be refreshed to explicitly reflect the board’s responsibility for “establishing and maintaining” the internal control framework, as per the code.
Conclusion
The future of UK corporate leadership is moving away from a loose definition of “comply or explain”. Nowadays, the term “explain” is being replaced with a more concerted requirement to “thoroughly justify”. You need evidence in multiple areas because that’s the only generator of credibility.
If that overwhelms you at first, don’t worry. These changes will naturally cause worry and uncertainty about future capacity. There are always avenues to adapt, from bringing in new talent to your board to dedicated training.
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