Corporate governance for smaller PLCs


The UK corporate governance regime is one of the most sophisticated and flexible in the world. For Premium Listed, FTSE 100 companies, the foundation of the corporate governance regime is the UK Corporate Governance Code (the “Full Code“). This is combined with statutory obligations, investor guidelines and industry best practice to provide a comprehensive corporate governance framework.

However smaller companies, including those with a standard listing, those listed on the AIM market and those traded on various exchanges such as the ICAP Securities and Derivatives Exchange (previously PLUS), have more flexibility in the approach they adopt to  their corporate governance. This allows smaller listed companies to follow a corporate governance framework more suited and proportionate to their size and complexity.

The London Stock Exchange has previously said that the Full Code should be a standard that all listed companies should aspire to, but the for smaller companies where the Full Code is not mandatory, they should only apply the applicable provisions of the Full Code. This is entirely true, but it is not of much practical assistance to those companies that fall into these categories.

The key test for any company’s corporate governance regime is whether it helps deliver growth to shareholder value over the longer term. One of the most useful tools for achieving this is produced by the Quoted Companies Alliance.

Quoted Companies Alliance

The Quoted Companies Alliance (“QCA“) is a membership organisation designed to promote the interests of small to mid-size quoted companies. The QCA publishes the Corporate Governance Code for Small and Mid-Sized Quoted Companies (the “QCA Code“).  This aims to apply the key parts of the Full Code and other relevant guidance to the needs of small and medium sized listed PLCs.

The QCA Code identifies 10 principles of corporate governance that represent best corporate governance practice for applicable companies. It recommends that companies publish a corporate governance statement in their annual report dealing with each of the 10 principles; disclosing how each principle was (or was not) implemented. The QCA Code adopts the ‘comply or explain’ approach that is followed by the Full Code and allows companies to explain why they have not complied with a particular principle and provide details of any alternative systems they have put in place to deal with the issue.

The ten principles of the 2018 QCA Code are as follows:

Deliver growth:

  • Establish a strategy and business model which promote long-term value for shareholders;
  • Seek to understand and meet shareholder needs and expectations;
  • Take into account wider stakeholder and social responsibilities and their implications for long-term success;
  • Embed effective risk management, considering both opportunities and threats, throughout the organisation;

Maintain a Dynamic Management Framework:

  • Maintain the board as a well-functioning, balanced team led by the chair;
  • Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities;
  • Evaluate board performance based on clear and relevant objectives, seeking continuous improvement;
  • Promote a corporate culture that is based on ethical values and behaviours;
  • Maintain governance structures and processes that are fit for purpose and support good decision-making by the board;

Build Trust:

  • Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
2018 update of the QCA code

The original publication of the Corporate Governance Guidelines for Smaller Quoted Companies was published by the QCA in September 2010 and this was a development (in part) on the Corporate Governance Guidelines for AIM Companies. The QCA Code has since been updated in 2013 and 2018 which, at the time of writing, is the latest version.

Since September 2018, all AIM companies have been required to apply a recognised corporate governance code and explain how they do so. The majority choose the QCA Code.

For further information on corporate governance for publicly listed companies, please see our specific services for PLCs or please feel free to contact us to discuss how we can help. To purchase a copy of the 2018 QCA Code, please see here.

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