As we await the result of the Financial Reporting Council’s overhaul of the UK Corporate Governance Code, it is worth noting that change will not just be restricted to companies listed on the main market. From September, smaller companies listed on AIM will also be required to apply a recognised corporate governance code for the first time.
However, most small and mid-sized companies are likely to find the FRC’s UK Corporate Governance Code unsuitable to their size and stage of development. In fact, research indicates that around 400 companies on AIM currently refer to the Quoted Companies Alliance (QCA) Corporate Governance Code, which is specifically tailored for companies at the smaller end of the market cap spectrum. It includes 10 corporate governance principles that companies should follow, and step-by-step guidance on how to effectively apply these principles and adopt best practice.
At Downing, we expect our investee companies to apply rigorous and effective corporate governance and have directors who understand their duties and are familiar with their legal responsibilities. These can be demanding – directors are accountable for the culture, foresight and success of the company, and must act in the best interests of the company to benefit current and future shareholders.