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

Compliance with the UK Corporate Governance Code is not a legal requirement; it serves as a set of best practice guidelines for companies, particularly those listed on the stock exchange. The Code is designed to promote high standards of corporate governance and is applicable to publicly traded entities, although adherence to its principles is achieved on a “comply or explain” basis.

This means that while listed companies are expected to follow the Code, they can choose not to do so as long as they provide a clear explanation for any deviations. The intention is to enhance transparency and accountability without imposing rigid legal obligations. Thus, the principle of 'comply or explain' reinforces that compliance is expected but not strictly enforced as a legal requirement.

The other choices consider the legal status of compliance based on company type, but they do not capture the essence of the voluntary nature of the Code's application. For instance, while listed companies are generally the primary focus, private companies are often not bound by these guidelines unless specified by regulations or shareholder agreements.