Is compliance with the UK Corporate Governance Code a legal requirement?

The UK Corporate Governance Code provides a framework and set of principles aimed at promoting good governance practices among UK companies. However, compliance with this code is not mandatory in a legal sense; rather, it operates on a "comply or explain" basis. This means that while companies are encouraged to follow the guidelines, they are not legally bound to do so. Instead, if a company chooses not to comply with certain aspects of the code, it must provide an explanation for its decision.

This flexibility allows companies to adopt governance practices that are more suited to their specific circumstances while still being held accountable to shareholders and stakeholders through transparency. As a result, the answer indicating that compliance is not a legal requirement accurately reflects the voluntary nature of the code's adherence, reinforcing the importance of governance without imposing strict legal obligations. This principle applies universally to companies, making the assertion applicable to both public and private entities alike.