Keeping Control of Code Changes

glass house

Keeping in control of code changes is undoubtedly crucial to any company’s operation. On 30th March 2018 new versions of the AIM Rules for Companies and AIM Rules for Nominated Advisers were launched which, together with the changes to the QCA change will have a huge impact on AIM companies, especially in regards to openness and transparency!

There have been a number of changes to the Rules and listed companies should familiarise themselves with all these changes. One of the most significant changes is to AIM Rule 26 which although subtle in wording, places additional responsibilities on companies to explain not only how they comply with the code but detailing where it departs from its chosen code and why. Prior to the changes a company did not need to explain why it did not follow all elements of the chosen code.  The changes also remove the ability for companies to state that it has not adopted a corporate governance code, so any AIM companies currently choosing not to officially adopt a code, will no longer be able to do so and such Boards should be looking now at which Code best suits its company.

In order to ensure full compliance of AIM 26, once a Code has been adopted, companies should consider undertaking an audit (if it hasn’t done so already) against the chosen code to identify where it is complying and where it deviates, to ensure that full transparent explanations can be provided. The information should be published on the company’s website with such information being reviewed annually including the date on which the information was last reviewed. The LSE has commented that the annual review would likely take place at the time that the company prepares its annual report and accounts.


The clock is ticking!

Although the amendments to the AIM Rules will apply from 30th March 2018, AIM companies will have until 28th September 2018 to comply fully with the new requirements, in order to give them and nominated advisers adequate time to prepare for the change.

Which code?

AIM companies may choose which recognised code they adopt as the LSE allows flexibility to ensure the appropriate code is chosen in regards to the size, type and stage of development of the business. The most common choices are the QCA Code and the UK Corporate Governance Code but companies may choose other regimes as long as they are ‘recognised’ – for example if they are listed on other markets they may wish to adopt a code from their own jurisdiction or a company may choose sector specific codes.

The Quoted Companies Alliance (QCA) Code Update

The majority of AIM listed companies have adopted the QCA Code, which was also updated at the end of April 2018 to coincide with the changes to the AIM rules.  The new code is shorter and much easier to follow than the previous version and now sets out very useful disclosure requirements in relation to each principle, making it even easier for companies to improve their openness and transparency.


The QCA Principles

With ten key principles to follow and clear guidance, it is becoming easier for companies to improve their corporate governance, as long as they give it the time and focus that it needs. The new QCA code outlines the following ten principles:

  1. establish a strategy and business model which promote long-term value for shareholders
  2. seek to understand and meet shareholder needs and expectations
  3. take into account wider stakeholder and social responsibilities and their implications for long-term success
  4. embed effective risk management, considering both opportunities and threats, throughout the organisation
  5. maintain the board as a well-functioning, balanced team led by the chair
  6. ensure that between them the directors have the necessary up-to-date experience, skills and capabilities
  7. evaluate board performance based on clear and relevant objectives, seeking continuous improvement
  8. promote a corporate culture that is based on ethical values and behaviours
  9. maintain governance structures and processes that are fit for purpose and support good decision-making by the board
  10. communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.


QCA Disclosures – improving openness and transparency

We’ve provided you with an ‘at a glance’ summary of the key QCA disclosure recommendations which have been designed to complement the revised AIM Rules.

Disclosures are required on:

  • glass of waterBusiness model & strategy reporting
  • Shareholder engagement
  • Stakeholder feedback
  • Risk management
  • Details of directors inc. independence and time commitment
  • Meetings and attendance records
  • Directors’ relevant skills and experience
  • Role of external and internal advisors.
  • Board evaluation and performance
  • Succession planning
  • fountain penCorporate culture
  • Roles of responsibilities of Chair and others with specific individual responsibilities or remits
  • Role of Committees and matters reserved for the Board
  • Plans for evolution of governance framework
  • Individual reports from Audit and Remuneration committees
  • Details of significant votes against resolutions within the Board


Adapt and be distinctive.

Show your stakeholders and shareholders that you are a healthy company and a good investment choice – do this by adopting an approach which shows your company is in control of its obligations.  Tools such as the Bridgehouse QCA Compliancy Checklist can help your company to do this – a low cost template that it is easy to upload to any website or display on corporate literature. We can also provide a more detailed and bespoke compliance audit if required. Please contact us here to find out more.