Inside AIM – Preparation for Corporate Governance Changes

From 28 September 2018, AIM companies must ‘comply or explain’ against a recognised corporate governance code, and where they depart from the chosen code, explain why they have done so.

1. Annual review

After 28 September 2018, an AIM company must review its corporate governance disclosures annually. AIM expects this to be done in conjunction with the preparation of the company’s annual report and accounts.  If an AIM company has not yet made a disclosure against a recognised code in its annual report, the corporate governance statement must be disclosed on its website by 28 September 2018.

2. Website

The corporate governance statement should be made on the AIM company’s website, clearly presented (including, the date it was updated) and easily accessible from the ‘AIM Rule 26’ landing page. It is acceptable for the statement to incorporate by reference (for example, disclosures that are provided in a clearly delineated corporate governance section of the annual report) provided that the material is freely available and the statement clearly indicates where the disclosure can be read (i.e. the relevant page of the annual report or a URL link).

AIM companies are encouraged to provide a detailed explanation of the company’s practices against the principles of a chosen code, in a manner that enables shareholders to evaluate how the principles have been applied, rather than simply identifying areas of non-compliance.

3. Recognised code

The Exchange has not made a prescribed list of recognised codes as it remains preferable for AIM companies to have a range of options to suit their specific stage of development, sector and size.

The Exchange has referenced established benchmarks such as the QCA Corporate Governance Code and the UK Corporate Governance Code.  However, AIM companies with a dual listing in their home state are allowed to report using an appropriate standard in their home jurisdiction. For example, an Australian incorporated company dual listed on ASX/AIM can use the recommendations set by the ASX Corporate Governance Council.

AIM companies are encouraged to keep informed of any changes to the recognised code that they apply.

4. Investor engagement

The Exchange emphasises that good corporate governance is not simply about codes or rules; it involves strong leadership, a positive culture, robust systems and risk management. These all encourage and reinforce behaviours that ensure company representatives act to protect the interests of the company and its shareholders. The Exchange intends the new rules to provide information to investors and enhance the engagement between investors and the boards.  It is for investors to determine whether the corporate governance policies, practices and any reasons stated for non-compliance with the adopted code, are appropriate for the AIM company.