October 9, 2018 Publishing your corporate governance code
New stock exchange regulations came into force on 28 September 2018 requiring all AIM listed companies to publicly set out which corporate governance code they follow. We highlighted this change of regulation in our article of May 2018 in which we reviewed the new Quoted Companies Alliance (QCA) corporate governance code but consider it appropriate to revisit the subject now that the regulations have come into force.
The first area to consider is the way in which the new regulations bring corporate governance very much into the open. Not only do AIM listed companies have to follow a recognised code; they have to publish details of that code on a publicly available free website. Moreover, they have to set out how they comply with the code and explain the reasons for any divergence. This requirement isn’t simply a one-off exercise. The information has to be reviewed annually with the website including the date of last review.
Of course this isn’t the only information which stock exchange rules require AIM listed companies to disclose via the web. Key information which has to be made publicly available includes:
- The names and details of board directors including a description of their responsibilities,
- The last three years annual accounts,
- Incorporation details including shareholdings and articles of association,
- Details of notifications the company has made in the previous twelve months,
- Shareholder information including details of any restrictions on trading and where the AIM company is not incorporated in the UK, a statement confirming that the rights of shareholders may be different from those applying to UK companies.
Requiring companies to publish such information not only enhances the dialogue with existing shareholders, it also acts as a starting point in the provision of information to prospective shareholders and investors. Not only that, the requirement for organisations to review and revise the application of their chosen corporate governance code on an annual basis helps to keep governance at the forefront of board responsibilities.
And that’s no bad thing. With corporate governance encompassing a wide range of areas including corporate culture, board diversity, succession planning, risk management, social responsibility, and stakeholder/ shareholder outcomes it is easy to see how effective governance underpins company success.
It’s also worth noting that whilst this publication requirement only applies to AIM listed companies, following a review chaired by James Wates CBE new corporate governance regulations are to be put in place which will apply to larger private limited companies. The FRC consultation in respect of these closed in September and we will report more fully once the final version of these principles are published later this year.