Out-Law News 1 min. read

'Shorter and sharper' code for smaller quoted companies published

A refreshed corporate governance code for small and mid-sized UK quoted companies has been published by the Quoted Companies Alliance (QCA).

The "shorter and sharper" code has been released to coincide with a change to the listing rules governing the Alternative Investment Market (AIM), the international market for smaller, growing companies operated by the London Stock Exchange (LSE). From September 2018, AIM-listed companies will be required to apply a recognised corporate governance code, and to explain how they do so.

The QCA Corporate Governance Code was first published in 2013, and is intended to provide smaller quoted companies with a corporate governance framework that is tailored to their needs and less prescriptive than the UK Corporate Governance Code, which applies to premium listed companies. More than half of the over 900 companies currently listed on AIM refer to the QCA Code, while a "significant minority" of AIM companies do not currently apply any code, according to the QCA.

"With AIM companies required to report from 28 September this year how they comply with a recognised corporate governance code, the new QCA Code is very timely," said corporate governance expert Martin Webster of Pinsent Masons, the law firm behind Out-Law.com.

"Like the Financial Reporting Council's proposed new UK Corporate Governance Code, it is shorter and sharper than the previous version. It is also easier to follow, with the QCA setting out 10 principles of corporate governance and the related disclosures a company should make. The Code recommends that some of those disclosures should appear on a company website rather than the annual report and accounts, a significant difference to the FRC Code," he said.

The revised QCA Code was drafted by corporate governance experts at the QCA and a standalone working group made up of industry experts. It consists of 10 corporate governance principles that companies should follow, along with step by step guidance on how to effectively apply these principles.

The code sets out what companies need to do in order to deliver growth in long-term shareholder value; maintain an efficient, effective and dynamic management framework; and build trust with shareholders and other stakeholders. It emphasises the importance of good communication with shareholders and others, and indicates where companies should be making clear, well-signposted disclosures of compliance in their annual reports or on their company websites.

From 28 September 2018, all AIM companies will be required to adopt a "recognised" corporate governance code, and to state on their own websites which code they have adopted. Companies will also be required to set out how they comply with that code and, where they do not comply, explain their reasons for non-compliance. The LSE will also expect these companies to provide meaningful information about their approach to corporate governance to their investors.

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