On April 25, 2018 the Quoted Companies Alliance (QCA) published a revised QCA Corporate Governance Code (QCA Code) which replaces the previous version published in May 2013.
The revised QCA Code is constructed around 10 broad principles, accompanied by an explanation of what those principles entail (rather than the 12 principles in the 2013 QCA Code), together with a set of disclosures. It sets out what the QCA considers to be appropriate arrangements for growing companies and asks companies to provide an explanation about how they are meeting the principles through the prescribed disclosures. The QCA Code operates on a “comply or explain” basis so where a company departs from the principles and their application, it will be expected to provide a well-reasoned explanation for doing so as part of its reporting on corporate governance.
The disclosures set out after each principle indicate the areas that companies need to address in their reporting on corporate governance and these should reflect how the company has applied the principles and be tailored to the company’s circumstances. In addition to these disclosures, the correct application of the QCA Code also requires that the chair provides a clear explanation of how the company applies the QCA Code in a corporate governance statement and it is recommended that this be included both in the annual report and on the company’s website.
The 10 principles are as follows:
- Principle 1 – Establish a strategy and business model which promote long-term value for shareholders.
- Principle 2 – Seek to understand and meet shareholder needs and expectations.
- Principle 3 – Take into account wider stakeholder and social responsibilities and their implications for long-term success.
- Principle 4 – Embed effective risk management, considering both opportunities and threats, throughout the organisation.
- Principle 5 – Maintain the board as a well-functioning, balanced team led by the chair.
- Principle 6 – Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities.
- Principle 7 – Evaluate all performance based on clear and relevant objectives, seeking continuous improvement.
- Principle 8 – Promote a corporate culture that is based on ethical values and behaviours.
- Principle 9 – Maintain governance structures and processes that are fit for purpose and support good decision-making by the board.
- Principle 10 – Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders.
The QCA Code also includes sections on good corporate governance and on the roles and responsibilities of the board, the chair, the senior independent director, the non-executive director, the executive directors, the audit committee, the remuneration committee, the nomination committee, the company secretary and shareholders.
The QCA’s press release announcing the revised Code notes that, as a result in a change to the AIM Rules with effect from 30 March 2018, all AIM companies will be required to apply a recognised corporate governance code and explain how they do so from September 2018. The QCA’s research indicates that currently over half of the companies on AIM refer to the QCA Code but a significant minority of AIM companies do not currently apply any code. A copy of the QCA Code can be purchased from the QCA.
(QCA, New QCA Corporate Governance Code, 25.04.18)