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The new 2018 QCA Corporate Governance Code for small & mid-size quoted companies

27 June 2018

The Quoted Companies Alliance, the independent membership organisation that champions the interests of small to mid-size quoted companies, has recently released its revised and updated QCA Corporate Governance Code 2018.

Although this code is tailored to meet the needs of small and mid-size quoted companies, it states that it can be adapted for use by privately owned companies particularly those that are considering an IPO.

The timing of this revised code is helpful because, from 28th September 2018, the London Stock Exchange is requiring each AIM company to state on its website (along with the other Rule 26 information and documents) the corporate governance code that the company applies, how the company complies and explain why, where it does not comply, with that code. The company must review this information annually. This is one of the changes to the AIM Rules for Companies recently announced in AIM Notice 50.

Until now, AIM companies have had the choice of either noting on their website which corporate governance code they followed, or merely stating they did not follow a code and setting out their own arrangements. Now each AIM company will have to choose a code. The QCA code is now an option for them.

Which corporate governance codes have small and mid-size companies followed to date?

The QCA research indicates that over half of the current 900+ AIM companies refer to the QCA Corporate Governance Code. Of the remaining companies on AIM that do not refer to the QCA Code:

  • many choose to issue “boilerplate” statements saying that they do not follow a corporate governance code due to their size and stage of development;
  • some state that they follow the Financial Reporting Council (FRC) UK Corporate Governance Code (or at least some aspects of it);
  • a small number follow the corporate governance code of their home country (for example, from the Australian ASX Corporate Governance Council); and
  • a small number follow other codes that are tailored for their sector (for example, from the Pensions and Lifetime Savings Association).

Under the UK Listing Authority’s Listing Rules, all companies with a premium listing of equity shares, whether incorporated in the UK or elsewhere (essentially those on the London Stock Exchange’s Main Market) must include a statement in their annual financial reports indicating how they apply the principles of the FRC's UK Corporate Governance Code April 2016. We understand that many small and mid-size companies find that this code is unsuitable for their size and stage of development. However that code is currently under review and we await publication of the revised version later this year.

The QCA Corporate Governance Code 2018

The QCA state “Our Corporate Governance Code (2018) is a practical, outcome-oriented approach to corporate governance that is tailored for small and mid-size companies. It is a valuable reference for growing companies wishing to follow good governance practice.

“This new and updated version of the Code includes 10 corporate governance principles that companies should follow, and step-by-step guidance on how to effectively apply these principles.”

The new QCA code states “good corporate governance is about having the right people (in the right roles), working together, and doing the right things to deliver value for shareholders as a whole over the medium to long-term”.

And: “Good corporate governance is not complete without it being communicated effectively, thus promoting trust among shareholders and other stakeholders.”

What we think

This new QCA code has been presented clearly and succinctly. At only 22 pages it covers what we would regard as the essentials with enough explanation to give the reader a good understanding of how to apply it to their governance structures.

You can access the QCA Corporate Governance Code 2018 here.

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