AIM companies face corporate governance code compliance

The London Stock Exchange has introduced rules requiring all AIM listed companies to adopt a recognised corporate governance code and explain how they do so, with the information to be included on the company’s website

The corporate governance requirements for the Alternative Investment Market (AIM), a sub market of the London Stock Exchange, are set out in AIM Rule 26 and will take effect from 28 September 2018.

All new applicants to AIM from 30 March 2018 are required to state which corporate governance code they intend to follow but otherwise will have until 28 September 2018 to fully comply with the new requirements.

AIM companies will have to supply details of a recognised corporate governance code that the board of directors has decided to apply, how the company complies with that code, and where it departs from its chosen corporate governance code an explanation of the reasons for doing so.

This information will have to be reviewed annually and the website should include the date of the last review.

Tim Ward, CEO Quoted Companies Alliance (QCA), said over 400 AIM companies currently use the QCA corporate governance code, and the organisation, which represents small and mid-sized quoted companies, said it will be releasing an updated version in April.

‘We see this as another positive step to further improve the integrity of AIM. Corporate governance and the way companies are managed have come under great scrutiny in recent years and the QCA’s own investor survey shows that investors seek out growing companies that apply good corporate governance,’ Ward said.

 The London Stock Exchange held a consultation on the proposals last year, and in its feedback said that while some respondents recommended that ‘recognised corporate governance code’ be defined, its view was that it should not prescribe a list of recognised codes and that it remains preferable for AIM companies to have a range of options to suit their specific stage of development, sector and size.

The proposal outlined in the discussion paper was that an AIM company should comply or explain against one of the industry codes of its choosing which is appropriate for a company admitted to a public market. It should also include examples of existing codes such as the UK Corporate Governance Code, regulated by the Financial Reporting Council (FRC), and the QCA corporate governance code and the.

The rule also requires an AIM company to review its corporate governance disclosures annually, and the stock exchange said it expects that in most cases this review will take place at the same time as an AIM company prepares its annual report and accounts.

The consultation summary also stated: ‘London Stock Exchange considers that good standards of corporate governance are a significant contribution to a company’s long term success.

‘Accordingly, AIM companies and nominated advisers are reminded that good corporate governance is supported by a meaningful explanation of the company’s practices against the principles of the chosen code, rather than simply identifying areas of noncompliance. This principles-based approach to corporate governance is consistent with our overall approach to AIM.’

London Stock Exchange AIM rules for companies issued March 2018

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