Posted in Reporting on 15 March 2018By Leon Milligan, Consultant
Following the anticipated amendments to the AIM rules earlier this month, now is the time to plan ahead to ensure your governance standards meet the new requirements.
Of particular note are the changes to the corporate governance rules in AIM Rule 26– Company information disclosure on a company’s website, which take effect from 28 September 2018. The objective of these changes is to improve governance standards for AIM companies – an area of increasing focus for investors and other stakeholders.
The approach currently taken by most AIM companies will no longer be enough.
The main thrust of the amendment is that AIM companies can no longer merely state they do not follow a corporate governance code nor can they provide a boilerplate statement. Currently, the vast majority of AIM companies provide a generic statement describing that they follow aspects of a code which they believe are suitable for the size and development of their company. Under the new requirements, this will no longer be enough.
What do AIM companies need to do?
Going forward AIM companies will be required to provide:
"Details of a recognised corporate governance code that the board of directors of the AIM company has decided to apply, how the AIM 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 should be reviewed annually and the website should include the date on which this information was last reviewed."*
This is expected to be conducted in line with the preparation of the annual report and all other AIM Rule 26 disclosures must also be updated and accurate on the stated date.
Most AIM companies follow, at least in part, the QCA Code or the UK Corporate Governance Code, both of which will be updated within the next few months. As a result of this amendment and the forthcoming code changes, all AIM companies will have to review the codes, select which code to follow, identify the steps they need to take to increase their compliance, and, where the chosen code has not been followed, provide a robust explanation.
What’s our view?
In recent years the importance of good corporate governance has been widely discussed, with many Main Market companies improving their governance processes, reporting and communication. This AIM Rule amendment will certainly close the gap in terms of the general standards of corporate governance and is clearly a very good thing. However, for some AIM companies, this will be a significant undertaking that requires early consideration.