On 25 April 2018, a revised edition of the QCA Corporate Governance Code (the “2018 QCA Code”) was released, which is timely given the recently announced requirement for AIM Companies to comply or explain against a recognised corporate governance code by 28 September 2018, and represents the most recent measures adopted which aim to increase corporate transparency and accountability.
The 2018 QCA Code emphasises the importance of good communication with shareholders and others, and details where companies should be making clear, well-signposted disclosures of compliance in their annual reports and on their company websites.
The 2018 QCA Code is shorter than the previous edition, with 10 principles emerging after revisiting the 12 principles of the previous QCA code and considering their practical application.
Although the principles have been consolidated, there is an increase in the number of suggested disclosures, which are now 32, up from the previous 20. Roles and responsibilities have been revised and expanded and a new description of how a board is typically composed, how it works and what key challenges it faces regarding its directors’ independence is now included
The 10 new 2018 principles (as taken from the QCA Code) are as follows:
- 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 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
- communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders
The chair of the board must also provide a corporate governance statement which details his/her role and demonstrates his/her responsibility for corporate governance and also explains how the QCA Code is applied by the company and how its application supports the company’s medium to long-term success. In addition, the chair is required to outline any areas in which the company’s governance structures and practices differ from the expectations set by the 2018 QCA Code and identify any key governance related matters that have occurred during the year, including any significant changes in governance arrangements.
The 2018 QCA Code recommends that the corporate governance statement is included in the annual report and on the company’s website.
At ONE Advisory, we have developed a checklist to assess our clients’ compliance with the 2018 QCA Code and a template for disclosures to be made in relation thereto on the client annual report and website. For further information, please contact Liam O’Donoghue at firstname.lastname@example.org, or +44 (0) 20 7583 8304.