New corporate code comes into force - UK: "New rules to reform the way UK businesses are run came into force over the weekend, with the aim of preventing corruption and other corporate scandals.
The new corporate code, drawn up by former investment banker Derek Higgs, has finally become law after months of consultation between business groups and the Financial Reporting Council (FRC), which decides whether to implement proposed accounting rules.
The measures, which are designed to stop any Enron-style corporate scandals and boost shareholder confidence, include:
* A chief executive is now not allowed to go on and become a chairman of the same firm.
* Company audits are to be toughened up to ensure that businesses’ accounts are in order.
* A higher proportion of company boards should consist of non-executive directors (NEDs).
* Appointment of directors should be done in a more transparent and scrutinised manner and from a wider range of candidates.
Although the new regulations will be more strictly applied to larger firms, small businesses will have to comply with the rules or explain to authorities the reasons why they have not done so.
The FRC said that companies that do not follow the code will risk their reputation with other businesses, shareholders and customers."