Late October saw the Financial Reporting Council (FRC) publish the final draft of the UK Stewardship Code 2020, with various notable changes having been made to the consultation draft that will be of interest to organisations making use of London Registrars’ company secretarial services.
What changes have been made?
Among the alterations made to the previous draft are amendments to the definition of stewardship, to clarify that the purpose is to create value for clients and beneficiaries as opposed to the beneficiaries, the economy and society as the previous draft stated.
Indeed, the Code now defines stewardship as “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and the society”.
The 2012 Code had 10 ‘comply and explain’ principles with supporting provisions, supported by detailed guidance.
The new Code has been substantially restructured, so that it now consists of 12 ‘apply and explain’ principles for asset owners and six ‘apply and explain’ principles for service providers, with reporting obligations for both.
But these are not the only significant edits
The final draft of the 2020 Code also incorporates an introductory statement that reporting should be fair, balanced and understandable, with examples of successful and unsuccessful outcomes.
Removed from this draft, meanwhile, is the requirements for a separate policy and practice statement on signing up to the Code.
Another significant change is the addition of a further reporting expectation that asset owners and managers must disclose the proportion of shares voted in the past year, and why.
As for the FRC’s proposed mechanism for investors to escalate concerns about an investee company in confidence, the FRC said it had shared responses to this consultation question with the Department for Business, Energy and Industrial Strategy (BEIS) for their consideration.
With regard to enforcement, the FRC stated that it would grow its stewardship team and work with BEIS to keep enforcement and regulatory powers under review.
The new version of the Code will take effect from 1 January 2020.
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13 January 2020