As a Non Exec Search firm we have heard many times over the years when discussing the importance and benefits of Governance issues such as the need for Independent Non Execs and Diversity (skills, gender, age and ethnicity) on Boards of AIM Companies Chairs and CEOs responding with: “don’t you know that AIM Companies don’t have to comply with the UK Corporate Governance Code?” We have of course known this and therein has been the problem.

The costs for most AIM Companies to meet the provisions of the UK Corporate Governance Code have been too onerous and most small companies with limited resources (AIM companies) haven’t applied a Corporate Governance Code to date.

We are delighted to announce that as from September 2018 onwards, the London Stock Exchange has stipulated that AIM companies will have to follow a recognised Corporate Governance code and publicly state which code that is and set out the detail of their Governance structures. The two Codes that AIM Companies will likely decide to comply with are the FRC's UK Corporate Governance Code and the Quoted Companies Alliance’s (QCA) Code. We believe the QCA Code is a practical approach to Corporate Governance for those quoted companies in the UK who are small and mid-size growth firms as many on AIM are.

The new QCA Corporate Governance Code is built around ten broad principles and a set of disclosures. We believe that addressing each principle in turn will highlight those with the best Governance. Hopefully applying a Governance code like the QCA’s will help investors get a much more informed understanding as to how each company manages their risks, and a deeper appreciation of their internal cultures. In addition, the QCA Code will help investors directly compare a number of companies on these metrics by a common yardstick. We urge retail shareholders (ShareSoc Members) to read the QCA Code and encourage companies they invest in to adhere with the ten principles.

The good news is that applying a Corporate Governance Code like the QCA’s will help investors identify companies with the best internal cultures. Equally importantly, the renewed support for quoted smaller companies should help to generate further employment growth and extra tax revenue in the UK.

In April 2018, an updated edition of the QCA Corporate Governance Code was released which can be purchased here: and it will be interesting to see how the many AIM Companies who have hitherto not adhered to any Code improve their Governance. First Flight estimates that around 30% of AIM Companies have no women Directors on their Boards and no Independent Non Execs which is relatively easy to address with the addition of a good female Independent Non Exec. This should not be a box ticking exercise as the best candidates should always be appointed and First Flight currently runs at 40% women Non Exec appointments.

AIM Companies with no Independent Non Execs has been a major source of concern for investors.

Retail investors have long complained about poor Governance in small caps and they have had little ammunition to encourage the Directors to change so the new LSE rules are a big step forward.

Identifying companies with the strongest Governance and most agile culture should bring to the fore these companies who will be able to take advantage of the best opportunities. Assessing an AIM Company’s Corporate Governance standards is becoming more important and will become easier under the new LSE rules which we very much welcome.

Chris Spencer-Philips
Managing Director
First Flight Non-Executive Directors Ltd




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