A new era and new expectations: the Quoted Companies Alliance (QCA) Code 2023 is live.

While much has been published about the changes to the UK Corporate Governance Code, less has been written about the revised QCA Code 2023. Applying to years beginning on or after 1^st April 2024, it is now a reality. The first AGMs under the new regime will occur in the coming months and the first reports with their revised disclosures will soon be published.

Alternative Investment Market (AIM) and other companies applying this Code should be considering the implications and how they will ensure they meet the revised obligations.

In short, the Code introduces specific requirements that must be put to a shareholder vote. Or should the company decide not to, an explanation should be provided.

Principle requirements in the Annual General Meeting.

Election and re-election of directors.

Under Principle 6 all directors should submit themselves for election or re-election on an annual basis. This will result in increased activity for the Nominations Committee and the need to focus greater attention on succession planning for critical roles.

Remuneration report.

The annual remuneration report is required to be put to at least an advisory vote. Some organisations may mandate a binding vote following best practice of larger organisations. However, if this is not the case an advisory vote is now a requirement under Provision 9.

Share schemes and long-term incentive plans.

New, or significant amendments to existing, share schemes and long-term incentive plans must be put to a shareholder vote. As with the need to vote on the remuneration report, this brings AIM choosing and other companies choosing to apply the Code into line with larger listed companies.

Additional disclosures to focus on.

Revised and enhanced disclosures are now required, following best practice amongst larger companies. Suggested areas of focus include:

• Ensuring the Chair’s statement includes the impact of governance on purpose and is outcome focused.
• Explaining the company’s purpose and its link to and impact on the strategy.
• Describing how the culture supports the purpose and strategy – and how the board assess, monitors and acts on cultural indicators.
• Quantifying and providing narrative reporting in respect of ESG obligations and commitments.
• Describing how the board engages with stakeholders, particularly the workforce.
• Discussing how risks, including emerging risks, are identified and managed and how the board ensures the effectiveness of internal controls.
• Outlining how the board ensures it is effective including the conduct of board performance reviews and succession planning.
• Linking the policy on remuneration with the business purpose, business model, strategy and culture.

Conclusions: improving corporate governance.

While government plans to increase the focus and expectations on large Public Interest Entities have taken a back seat, the increasing focus on AIM (where around 90% of companies apply the QCA Code) through these new requirements indicates the continued desire to improve governance practices in all sectors.

AIM boards and those of other companies applying the Code should be looking at the larger listed companies and identifying those aspects of good governance that create real value – and that keep the organisation safe. Being clear about the strategic purpose and objectives – and how risks align to deliver on these ambitions. And ensuring risks are not only identified, but that there are also adequate responses.

BRAVE thoughts…

Our unique approach to considering risks and aligning governance processes in response to risks through the lens of the objectives, Objectives@Risk ™ is tailored to scaling organisations. We believe this is the way to embed responsible business practices and go beyond a tick-box approach to corporate governance codes. The time for those companies applying the QCA Code might just be now.