The Financial Reporting Council (‘FRC’) issued a revised Corporate Governance code in July 2018. This triggered the Association of Investment Companies (‘AIC’) to launch a consultation on their own code in September of that year.
During the FRC’s consultation prior to issuing their code the AIC lobbied for a number of changes including removal of the 9 year cap on tenure of the Chairman. The FRC retained this provision in their code and the AIC indicated that they would likely have to adopt this cap in order to secure FRC endorsement for their code. However, following their consultation the AIC has now been successful in removing the strict 9 year cap on tenure.
In removing the tenure cap the AIC have instead placed a requirement on Boards to develop and disclose a policy on the tenure of the Chair. In doing so they have provided Investment Companies with welcome flexibility in succession planning.
The final AIC code has also reversed a provision in their initial draft (taken from the FRC code) that the Chairman can’t be a member of the Audit Committee. However, they have retained the provision which states the Chairman of the Board can’t also Chair the Audit Committee.
Other notable features from the FRC code and final AIC code include:
The latter requirement will have a significant impact on Channel Island Investment Companies. Section 172 disclosures were previously only required under the strategic report disclosures for UK companies. However, the FRC brought this requirement into their code and the AIC have also adopted it.
The AIC’s final Corporate Governance code has been endorsed by the FRC, Guernsey Financial Services Commission and Jersey Financial Services Commission.