All AIM companies will be subject to ‘comply or explain’ corporate governance requirements from 28 September 2018. AIM regulation has made it clear that meaningful explanations will be required.

What’s changing?

From 28 September 2018, each AIM company must:

  • provide details of a recognised corporate governance code that the board of directors of the AIM company has decided to apply
  • explain how the AIM company complies with that code, and where it departs from its chosen corporate governance code provide an explanation of the reasons for doing so.

The corporate governance disclosures must be reviewed annually. The company must also state the date on which these disclosures were last reviewed.

Which corporate governance code should we apply?

Each AIM company should identify a code that suits their specific stage of development, sector and size.

In practice for AIM companies incorporated in the UK, this is likely to be either the QCA Corporate Governance Code or the UK Corporate Governance Code. Companies incorporated in other jurisdictions should consider whether there is an appropriate standard in their home jurisdiction.

Where do I find the changes?

The new rules are contained in AIM Rule 26. AIM Notice 50 (which is available at AIM Notices) contains a helpful summary of the changes. It also provides a link to the new AIM Rules for companies that will come into effect on 30 March 2018.

What do I need to do?

This topic should be included on the agenda for the next board meeting.

Each AIM company should then:

  • identify an appropriate corporate governance code
  • consider how ‘comply or explain’ will work for that company
  • prepare draft disclosures that provide a meaningful explanation of any departures from its chosen corporate governance code.

This reflects the statement in AIM Notice 50 that: “The London Stock Exchange considers that good standards of corporate governance are a significant contribution to a company’s long term success. Accordingly, AIM companies and nominated advisers are reminded that good corporate governance is supported by a meaningful explanation of the company’s practices against the principles of the chosen code, rather than simply identifying areas of non-compliance.