QCA publishes revised Corporate Governance Code

The Quoted Companies Alliance (QCA) has published a new edition of its Corporate Governance Code (QCA Code). It is designed as a "pragmatic and practical corporate governance tool…..[which adopts] a proportionate, principles-based approach, enhancing the user's ability to explain their application of the principles and their corporate governance arrangements".

The new and updated version of the QCA Code includes 10 corporate governance principles (reduced from 12 in the previous version) for companies to follow, accompanied by step-by-step guidance on how to apply them effectively. The 10 principles are based on three key themes of:

• delivering growth;
• maintaining a dynamic management framework; and
• building trust.

The principles are broadly similar to those in the previous version of the QCA Code, with the addition of a new principle which recommends, in the context of the maintenance of a dynamic management framework, the promotion of "a corporate culture that is based on ethical values and behaviours". Given the focus of the current corporate governance reforms on "stakeholder voice", it is not surprising that there is also a greater emphasis on delivering growth while taking into account "wider stakeholder and societal responsibilities".

The QCA Code also contains an overview of board roles and responsibilities, including how a board is normally composed and how director independence should be determined, albeit that both are, ultimately, a matter for the board to decide.

The QCA Code requires both the application of the 10 principles and the publication of certain disclosures which flow from them. In addressing these requirements, the QCA Code states that:

• emphasis should be placed on describing what is done and why it is done in a particular way; disclosures should not be approached as a "compliance exercise"; and
• boards must include clear, well signposted disclosures in order to claim that the QCA Code has been adopted. Companies may choose to publish these in their annual report, include them on their website as part of their AIM Rule 26 disclosures or use a combination of the two. The Code sets out, relative to each principle, a recommended location for each disclosure. Where different locations are used (i.e. the annual report and website), there should be clear signposting by way of an index on the website to where information can be found. The annual report of the company concerned should also contain a reference to where this index is located.

The revision of the QCA Code coincides with the recent amendment of the AIM Rules for Companies by the London Stock Exchange, which requires companies already admitted to the market to apply a "recognised corporate governance code" and explain how they do so as from 28 September 2018. Thus AIM-quoted companies will have a choice principally between the QCA Code and the FRC's UK Corporate Governance Code (Governance Code) which is, itself, currently being revised in light of the government's agenda  for governance reform. QCA members can also access the QCA's "Corporate Governance Files" which contain a draft board resolution for the purposes of adopting the QCA Code and guidance on governance matters which will be added to on an on-going basis.

With the Governance Code still in a state of flux and the time for AIM-quoted companies to comply with the revised AIM Rules counting down, many AIM companies will look on the publication of the revised QCA Code as being particularly timely. More substantively, the QCA Code's pragmatic approach and relative lack of prescription on certain issues, for example the methodology for stakeholder, and specifically workforce, engagement, board evaluation and the determination of director independence, is likely to make adherence to it particularly compelling.