On 27 June 2006, the Financial Reporting Council published an amended version of the Combined Code on Corporate Governance.   The changes to the Combined Code follow a review and consultation exercise carried out by the FRC in relation to the implementation of the 2003 Combined Code.  The amendments to the Combined Code are of a relatively limited nature and have been widely supported by both companies and investors.

Under the revised Combined Code:

  • Membership of remuneration committee (Provision B.2.1) – A chairman who is considered to be independent at the time of his appointment as chairman may now be appointed to the remuneration committee (although he cannot chair it).
  • Vote withheld box on proxy forms (Provision D.2.1) – In addition to boxes allowing shareholders to vote for or against a resolution, companies should include on proxy forms for shareholder meetings a "vote withheld" box.  A "vote withheld" will not be counted as a vote and will not be included in the calculation of the proportion of votes for or against a resolution - this should be made clear on the proxy appointment form and in any announcement of the results of a vote.
  • Announcement of results of vote (Provision D.2.2) – Where votes at a shareholder meeting are taken on a show of hands, companies should as soon as reasonably practicable publish on their website details of the proxies lodged, including the number of votes for a resolution, the number of votes against a resolution and the number of shares in respect of which votes were withheld.
  • Information made available on company's website (Provisions A.4.1, B.2.1 & C.3.3) – A company can satisfy the requirement under the Combined Code to make the terms of reference of the remuneration, audit and nominations committees available by providing copies on its website.

The UK Listing Authority is required by statute to carry out a separate consultation exercise before listed companies can be formally required by the Listing Rules to disclose how they have applied the revised Combined Code.  The UKLA consultation is expected to commence in September 2006 and, subject to responses to that consultation, it is currently anticipated that the Listing Rules will apply to the revised Combined Code with effect from the second quarter of 2007.

In view however of the limited nature of the changes to the Combined Code and the widespread support that those changes have received, the FRC is encouraging companies and investors to apply the revised Combined Code voluntarily for reporting years beginning on or after 1 November 2006.

A copy of the revised Combined Code can be found at:

http://www.frc.org.uk/documents/pagemanager/frc/Combined%20Code%20June%202006.pdf

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