From 28 September, all AIM companies must adopt a recognised governance code and then 'comply or explain'. In practice, for most companies, this means adopting either the UK Corporate Governance Code (the FRC Code) or the QCA Corporate Governance Code (the QCA Code) or a recognised code in a foreign jurisdiction. Both principal codes have recently been updated - the revised QCA Code in April and a new FRC Code this month (to take effect from 1 January 2019).
For many, this means reviewing or putting governance arrangements in place where there were none. This may be challenging – not only to decide which code to apply, but also to revisit your governance practices and consider whether they will meet future challenges and help deliver company strategy. Although the rule doesn't apply until the end of September, companies need to start preparing for it earlier depending on the timing of their annual reports and the governance arrangements they have in place.
Which code is best for me?
The QCA Code is less prescriptive and may be seen as less onerous than complying with the UK Corporate Governance Code which sets best standards in the field. But there are common features in both that boards must explain: including strategies, risks, culture, and stakeholder communications.
We have created a quick code comparison to give a high-level overview of the differences between the QCA Code and the FRC Code, highlighting the changes introduced in the revised FRC Code in July.
It is important to remember that governance is not one size fits all. Governance practices and reporting must help build and maintain trust and integrity with key stakeholders including investors, employees, and the wider community.