What Every NED Should Know About UK Corporate Governance Reform

UK corporate governance is in the middle of its most consequential shift in a decade — and the change lands squarely on the shoulders of non-executive directors. The Financial Reporting Council’s 2024 UK Corporate Governance Code is now in force, its headline internal-controls declaration takes effect for financial years beginning on or after 1 January 2026, and the wider statutory reform that was meant to accompany it has stalled. For a NED, the practical question is not whether governance is changing but what the current rules actually require of you, what has been quietly parked, and where your personal accountability now sits. This guide sets out the position as it genuinely stands, rather than as it was once promised.

Boards that treat this as a compliance exercise will miss the point. The direction of travel — outcomes over process, evidenced assurance over narrative comfort, individual director accountability over collective reassurance — reshapes what an effective non-executive actually does in the boardroom. If you are appointing to a board, or stepping onto one, understanding that shift is now part of the job. Exec Capital places non-executive directors who understand it, through our NED recruitment and board advisory practices.

How UK governance got here

The modern UK framework traces to the Cadbury Report of 1992, which followed a run of corporate failures and first codified the principles of transparency, accountability and boardroom effectiveness that still underpin the system. The Greenbury Report (1995) addressed executive remuneration, the Hampel Report (1998) consolidated earlier work into the first Combined Code, and the Higgs Review (2003) sharpened the role and independence of non-executive directors specifically. Each was a response to a crisis of confidence, and each pushed accountability further onto the board rather than management alone.

That lineage matters because the 2024 Code is the latest iteration of the same idea, not a departure from it. The pattern is consistent: a governance failure exposes a gap between what boards say they oversee and what they can actually evidence, and the response tightens the obligation on directors — and disproportionately on the independent ones — to provide credible, testable assurance. Carillion, BHS and Patisserie Valerie are the more recent names in that sequence, and they are the reason Sir John Kingman’s 2018 independent review of the FRC recommended replacing the regulator with a stronger, statutory body in the first place.

The 2024 Code: what has actually changed

The 2024 UK Corporate Governance Code was published by the FRC in January 2024 and applies for financial years beginning on or after 1 January 2025. Structurally it is close to the 2018 edition — the same five sections, the same “comply or explain” basis under the Financial Conduct Authority’s Listing Rules for companies in the relevant listing categories. Notably, the FRC did not carry forward much of what it consulted on in 2023; proposals around ESG reporting, diversity targets and audit-committee expansion were largely dropped after consultation. The Code that emerged is deliberately shorter and more focused than the version some boards were bracing for.

The changes that did survive concentrate in two areas. First, an outcomes emphasis: boards are expected to report on the outcomes of their governance activities in the context of strategy, rather than describing processes, and to give clear, meaningful explanations where they depart from a provision. Second — and this is the defining shift — a materially expanded Provision 29 on internal controls.

Provision 29: the internal-controls declaration

Provision 29 is the single most significant change in the 2024 Code, and it is the one every NED should understand in detail. It applies for financial years beginning on or after 1 January 2026 — later than the rest of the Code — which means the first declarations will not appear in annual reports until 2027. It asks the board to monitor and review the company’s risk management and internal control framework at least annually, and then to make a formal declaration in the annual report as to whether the company’s material controls were effective as at the balance sheet date.

In practical terms the annual report must set out:

• how the board monitored and reviewed the effectiveness of the risk management and internal control framework over the reporting period;
• a declaration of whether the board considers the material controls to have been effective as at the balance sheet date; and
• where controls did not operate effectively, the material weaknesses identified and the remediation or improvement plans in place.

The scope now expressly covers financial, operational, reporting and compliance controls — not financial controls alone. Crucially, the declaration is limited to material controls, and what counts as material is for each board to determine in light of its own size, business model, strategy and complexity. There is no prescribed list. That discretion is a genuine judgement call, and it is one the board — advised by its audit and risk committee — owns.

The shift Provision 29 represents is easy to state and hard to deliver: boards move from “we have controls” to “we can demonstrate, on evidence, that our material controls operated effectively throughout the period.” A documented policy is no longer enough. That raises the bar for the assurance a board needs before it can sign the declaration, and it puts the audit and risk committee — and the independent directors who sit on it — at the centre of the exercise. Boards would be well advised to run dry-run declarations across the 2025–26 cycle rather than meet the requirement cold.

The reform that has stalled — and why it matters

Here is where a NED needs to separate what is live from what is still promised. The Code changes above are real and in force. The wider statutory reform that was meant to sit alongside them is not.

For years the expectation was that the Kingman review’s central recommendation — replacing the FRC with a stronger statutory regulator, the Audit, Reporting and Governance Authority (ARGA) — would be delivered through an Audit Reform and Corporate Governance Bill. That Bill was revived in the July 2024 King’s Speech, then repeatedly delayed. By late 2025 the Government had confirmed it would not proceed with the reform in the current parliamentary session, citing the legislative load and the economic climate; correspondence also indicated the proposed regulator would be renamed the Corporate Reporting Authority (CRA) rather than ARGA, with expanded public-interest-entity thresholds and director sanctions, but without the more contentious measures on shared audits or Big Four market-share caps.

The practical consequence for a board is straightforward. The FRC remains the regulator today. The statutory director-sanctions regime and the enhanced enforcement powers that ARGA/CRA would have carried are not in force and have no confirmed timetable. A NED should therefore be precise: your accountability under the 2024 Code is real and immediate; the harder statutory backstop is, for now, paused. Governance content that still describes ARGA as imminent is out of date, and boards relying on it are planning for a regime that has not arrived.

The statutory duties that have not changed

Beneath the shifting Code and the stalled Bill sits a bedrock that is stable: the statutory duties of directors under the Companies Act 2006. These apply to executive and non-executive directors alike, and they are the foundation of everything a NED does.

Directors must act within their powers, exercise independent judgement, and exercise reasonable care, skill and diligence — judged by the general knowledge and experience reasonably expected of a person carrying out the role. They must avoid conflicts of interest and declare interests in proposed transactions. And under section 172, they must act in the way they consider, in good faith, would be most likely to promote the success of the company for the benefit of its members as a whole — while having regard to the longer-term consequences, the interests of employees, relationships with suppliers and customers, the impact on the community and environment, the company’s reputation, and the need to act fairly between members. The section 172 statement in the strategic report is where that duty becomes visible, and it is where the outcomes emphasis of the 2024 Code and the stakeholder-consideration duty in statute meet. Balancing those interests well is a defining NED skill, and one we explore separately in our guide to how NEDs help balance shareholder and stakeholder interests.

What this means for the NED role in practice

Read together, the live Code changes and the stable statutory duties point to a clear expansion of what independent directors are expected to do. The role is moving from oversight-by-assurance-received to oversight-by-assurance-tested.

Own the internal-controls conversation

Provision 29 makes internal-controls effectiveness a board declaration, not a management assertion. NEDs — particularly those on the audit and risk committee — need to understand how material controls are identified, tested and monitored across the year, and to be satisfied that the evidence supports the declaration before it is signed. That means engaging with internal audit, risk and finance functions on the substance of assurance, not just receiving their reports. If your board has not yet mapped its material controls and stress-tested the declaration process, that is the priority for the current cycle.

Push for evidence, not comfort

The outcomes emphasis of the 2024 Code rewards boards that can show what their governance actually achieved, and penalises boilerplate. A NED’s value here is the constructive challenge that separates a genuine control environment from a well-documented one. The question shifts from “do we have a policy?” to “can we demonstrate it operated?” — and asking it early, repeatedly and without embarrassment is precisely the independent contribution the framework is designed to elicit.

Keep independence real, not nominal

Independence remains the currency of the non-executive role. The Code’s criteria — tenure, financial interests, relationships with the company — are the starting point, but the substance is behavioural: the willingness to disagree with management in the room, to recuse where impartiality is compromised, and to hold a line on assurance when it would be easier to accept comfort. In a regime that has tightened accountability while leaving the statutory backstop unbuilt, the board’s own independent directors are the enforcement mechanism.

Get the composition right for what is coming

Provision 29 raises the premium on boards that carry genuine financial, risk and controls literacy among their non-executives, and on a well-run audit and risk committee. Succession planning should reflect that: the skills a board needed to receive assurance are not identical to the skills it needs to test and declare it. For financial-services boards, the PRA and FCA layer additional governance and senior-management expectations on top of the Code, which raises the bar again on the specialist independent directors those boards require.

A practical checklist for the current cycle

If you sit on — or are joining — a UK board caught by the Code, these are the questions worth pressing now:

• Has the board identified and documented its material controls, and is the basis for materiality defensible and company-specific?
• Is there a credible assurance model — internal audit, management testing, or a combination — capable of supporting a Provision 29 declaration for FY2026?
• Has the board run a dry-run declaration across the 2025–26 cycle, rather than planning to meet the requirement cold in 2027?
• Does governance reporting focus on outcomes and decisions, or has it drifted into process narrative that the 2024 Code discourages?
• Is the section 172 statement genuinely reasoned, or formulaic — and does it reflect real board deliberation on stakeholder interests?
• Is the board’s composition, and its audit and risk committee in particular, equipped to test assurance rather than merely receive it?

Where Exec Capital fits

The through-line of every reform in this article is the same: the independent director is being asked to carry more, on the record, with less external backstop while the statutory reform sits parked. That makes the calibre and genuine independence of a board’s non-executives more consequential than at any point since the last wave of governance failures. Getting those appointments right — the right controls literacy, the right committee experience, the right temperament for constructive challenge — is a search problem, and it is ours.

Exec Capital advises boards on non-executive and chair appointments across listed, private-equity-backed and regulated environments, led personally by a chartered accountant and former listed-company finance director who has sat on the other side of these obligations. If your board is preparing for the 2024 Code and Provision 29 and wants its non-executive bench to match what the regime now demands, we can help.

Adrian Lawrence

Adrian Lawrence FCA is the founder of Exec Capital. He is a Chartered Accountant and holds an ICAEW practising certificate in his own name with over 25 years’ experience operating at C-suite level, Adrian brings direct executive experience to senior search. His background spans private equity-backed businesses, owner-managed companies, and listed environments, giving Exec Capital a practitioner’s understanding of what leadership hires actually require.