FRC Guidance on Flexible Governance Reporting

FRC News

Published March 16th, 2026

Detected March 16th, 2026

Summary

The Financial Reporting Council (FRC) has published new guidance to help investors and advisors better understand flexible governance reporting. The guidance aims to encourage recognition of the value in companies thoughtfully departing from the UK Corporate Governance Code with clear explanations.

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What changed

The Financial Reporting Council (FRC) has issued new guidance aimed at investors, proxy advisors, and users of corporate reporting. This guidance clarifies the 'comply or explain' principle within the UK Corporate Governance Code, encouraging a more nuanced understanding of companies that depart from specific provisions. The FRC emphasizes that well-reasoned explanations for such departures are not governance failures but can indicate a sophisticated approach to governance.

This publication supports companies and investors during the annual reporting season, particularly as the first season under the updated Code begins. The FRC seeks to shift the culture away from viewing departures suspiciously, promoting transparency and confidence in how companies engage with their governance responsibilities. While this guidance is non-binding, it signals the FRC's continued focus on the quality of 'comply or explain' disclosures, with findings to be published later in the year.

What to do next

Review FRC guidance on 'comply or explain' reporting.
Assess current governance reporting practices for clarity and transparency in departures from the UK Corporate Governance Code.

Source document (simplified)

FRC publishes guidance to help investors and advisors recognise the value of flexible governance reporting

News types:

Published: 16 March 2026

The Financial Reporting Council (FRC) has today published updated guidance on 'comply or explain' reporting, designed to help investors, proxy advisors and other users of corporate reporting better understand and appreciate the value of companies that choose to depart from provisions of the UK Corporate Governance Code.

As annual reports begin to arrive from companies with December year-ends – and as the first reporting season under the updated Code gets underway, the FRC is supporting the investment community in recognising that a thoughtful, well-reasoned explanation for departing from a Code provision is not a governance failure. It is frequently evidence of a more considered and sophisticated approach to governance than simple box-ticking.

The guidance is intended to help investors and advisors understand what to look for when reading a departure explanation, and why a departure accompanied by a clear and transparent explanation should be seen as a positive indicator of a board engaging seriously with its governance responsibilities.

“The UK Corporate Governance Code is a global standard precisely because it offers companies the flexibility to govern in a way that suits their circumstances. A well-reasoned explanation for departing from a provision is not a red flag — it is evidence of a board thinking seriously about what good governance means for their company. We want to support companies and investors alike to embrace that spirit with confidence.”

Richard Moriarty, FRC CEO,
The FRC's guidance acknowledges that a culture has developed across the community including both issuers and investors and their advisers that considers departures from the Code suspiciously. The result is that companies declare full compliance even where an alternative approach would better serve their shareholders. and stakeholders – producing boilerplate reporting that reveals little about how a company is actually governed.

As the annual reporting season progresses, the FRC will continue to support users of corporate reporting in applying these principles. The FRC will publish its findings on the quality of comply or explain disclosures in its annual corporate governance review later this year.

Read the updated guidance