AIM – are you ready for the changes in corporate governance?

usinessman signing documents Print publication


New corporate governance requirements for AIM companies come into effect on 28 September 2018. From that date, AIM companies will be required to disclose on their website details of the corporate governance code that they have decided to apply, explain how they comply with such code or provide an explanation for why they don’t.

As reported in our March edition of Corporate Matters, AIM Notice 50 was issued by the London Stock Exchange (LSE) on 8 March 2018 confirming, amongst other things, changes to the AIM Rules for Companies in relation to corporate governance (Rule 26). The Notice stated that, although all new applicants to AIM needed to state which corporate governance code they intended to follow from 30 March 2018, all existing AIM companies had until 28 September 2018 to comply fully with the new requirements under Rule 26.

The changes require all AIM companies to report against a recognised corporate governance code chosen by the board of directors. AIM companies currently have the choice of either noting on their website which corporate governance code they follow, or stating they do not follow a code and setting out their own arrangements. From the end of September, the second option is no longer allowed.

An AIM company will need to disclose on its website which code it is applying, how it complies with its chosen corporate governance code or, where it departs from the code, explain the reasons for doing so. This information should be reviewed annually and the website should include the date it was last reviewed.

The LSE does not prescribe a list of recognised corporate governance codes that companies should follow as it believes that it is preferable for AIM companies to have a range of options to suit their specific stage of development, sector and size. Examples of existing codes are the Quoted Companies Alliance Corporate Governance Code and the UK Corporate Governance Code issued by the Financial Reporting Council, both of which have been updated in recent months.

To help companies and nominated advisors get ready for the changes, the LSE has published an Inside AIM update entitled ‘Preparation for Corporate Governance Changes’ which contains guidance for companies and answers some of the more common questions that it has received from nominated advisors.

In relation to timing of disclosure, the guidance states that:

  • An AIM company will be required to review its corporate governance disclosure annually. The LSE expects that in most cases this review will take place at the same time as the company prepares its annual report and accounts.
  • The company’s website should include the date when the company last reviewed its compliance with its chosen code and update its AIM Rule 26 disclosures to remain accurate.

In relation to where disclosures should be made:

  • AIM Rule 26 requires an AIM company’s corporate governance statement to be published on its website. The disclosure should be clearly presented and easily accessible from the AIM Rule 26 landing page on its website.
  • The guidance states that it is acceptable for the statement to incorporate by reference (for example disclosures that are made in a clearly delineated corporate governance section of an annual report) provided that the material is freely available and the statement clearly indicates where interested parties can read or obtain a copy of the material.
  • If an AIM company has not yet made disclosure against a recognised code in its annual report, the corporate governance statement must be disclosed on its website by 28 September 2018.

WM Comment

The guidance makes it clear that good corporate governance is not simply about codes and rules. Instead it involves strong leadership, a positive culture, robust systems and risk management. The new corporate governance requirements are intended to provide information to investors to enhance the engagement between investors and the boards of AIM companies. If you need advice in relation to choosing the most suitable corporate governance code and how to comply with the new rules please get in touch.