The Quoted Companies Alliance ("QCA") launched a revised set of Corporate Governance Guidelines for Smaller Quoted Companies ("Guidelines") this month. The Guidelines have been updated to take account of changes to the UK Corporate Governance Code published by the Financial Reporting Council in May.


The Guidelines replace the previous QCA guidelines for AIM companies (and the older guidance for smaller quoted companies) and are directed at quoted companies other than premium listed companies, which are required by the Listing Rules to report compliance against the UK Corporate Governance Code. The Guidelines may also be useful to premium companies which are looking to explain non-compliance with the UK Corporate Governance Code.

The QCA guidelines for AIM companies have a strong acceptance in the market and have recently received further endorsement from the London Stock Exchange. In its newsletter Inside AIM - issue 2, the LSE states: "The QCA's Corporate Governance Guidelines for AIM Companies have become a widely recognised benchmark for SME corporate governance. We fully support the use of these Guidelines to achieve a level of corporate governance measures appropriate for an AIM company."

The LSE states that it expects to see Nomads continue, and extend, their involvement in issuers' corporate governance by demonstrating an active involvement in the setting and satisfying of the corporate governance standards that their AIM company clients will follow. The revised Guidelines will therefore be significant for Nomads' compliance with their responsibilities.

Key issues

Evolving nature

The Guidelines emphasise that as a company evolves, so should its corporate governance regime (Guideline 1). This is a significant point in relation to AIM companies, which are often high growth, and is particularly important if a move up to the main market is envisaged in the future.

Strengthening of chairman's role

The Guidelines follow the UK Corporate Governance Code in stressing the importance of the chairman and delineating between the role of the chairman (running the board) and the role of the CEO (executing the strategy set by the board). The Guidelines suggest that as a minimum the chairman should report on how the Guidelines are being applied to provide for the company's long-term success. This was a point that was lobbied for by issuers in relation to the UK Corporate Governance Code, which "encourages" chairmen to report.

Board team

The Guidelines focus on the need to constitute a board which is a functioning team: there should be challenge and there should be a mix of functional and sectoral skills. The board should be supported by committees that have the necessary character, skills and knowledge to discharge their duties and responsibilities effectively.

Periodic board reviews

The board should periodically review its performance, its committees' performance and the performance of individual directors. External facilitation of reviews is not mandated, but reviews should lead to updates of induction, evaluation and succession plans and replacement or training of ineffective directors.


The requirement to maintain a sound system of risk management is supplemented by a requirement to define and communicate the company's risk appetite and how it manages key risks. This is caveated by reference to the need to maintain an appropriate balance between risk management and entrepreneurship.

Board re-election

In contrast to the UK Corporate Governance Code, and the previous version of the QCA guidelines for AIM companies, the Guidelines do not deal with board re-election other than by stating that the board should be periodically refreshed. The UK Corporate Governance Code mandates annual re-election for all directors of companies in the FTSE 350, but there has been something of a backlash by some shareholders against that proposal and its possible short-termist effects (see our article in the August 2010 Hogan Lovells Corporate Newsletter). The Guidelines have therefore left the position open for companies to determine the best course for them.


The Guidelines were launched on 2 September at an event held by the QCA in conjunction with Hogan Lovells International LLP at our London office. In commenting on the Guidelines, Baroness Hogg said:

"Good governance helps to underpin long-term performance and so matters to all companies, irrespective of their size. I welcome the updated QCA guidelines which sets out for smaller companies how they can apply the key principles of good governance in the UK Corporate Governance Code to their own circumstances."