An introduction to the QCA Code 

In April 2018, the Quoted Companies Alliance (QCA) published a new Corporate Governance Code (the "QCA Code"). It replaces the QCA's Corporate Governance Code for Small and Mid-Size Quoted Companies 2013. 

The publication of the QCA Code coincides with the change to AIM Rule 26 which requires AIM companies to include on their website:

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

The QCA Code and AIM Rules Change 
Existing AIM companies have until 28 September 2018 to comply with AIM Rule 26 while new applicants to AIM after 30 March 2018 have to state which corporate governance code they intend to follow but otherwise have until 28 September 2018 to comply.   

For the purposes of AIM Rule 26, the QCA Code is a 'recognised corporate governance code', so adopting and complying with the QCA Code (which requires compliance with its disclosure requirements) will enable an AIM company to comply with AIM Rule 26.  

Over the next few weeks, we will be producing a number of blogs covering the key aspects of the QCA Code. In the first of this series, we provide an introduction to the QCA Code and its ten principles.   

Who is the new QCA Code for? 

The QCA Code is tailored for small and mid-sized quoted companies and its previous iteration has been adopted by a number of companies quoted on the Alternative Investment Market (AIM). The QCA Code has, however, been designed to be flexible enough to be adopted by both listed and non-listed companies, so private companies looking to adopt best practice corporate governance should also consider the QCA Code as a tool to support their corporate governance framework. 

The QCA Code is based on the principle of 'apply and explain', with companies expected to provide an explanation about how they are meeting the QCA Code's principles and, where companies depart from the QCA Code's principles, they are expected to provide well-reasoned explanations for doing so. Compliance with the QCA Code is to be evidenced through disclosures on a company's corporate website and in its Annual Report, with disclosures and recommended locations set out in the Code against each principle for ease of reference. 

One new disclosure contained in the QCA Code is that of the Chairman's corporate governance statement, which the QCA recommends should be published in a company's Annual Report and on its corporate website (the latter by 28 September 2018 for AIM companies). We look at how companies can comply with this requirement in our second blog of this series.  

The QCA Code – 10 principles 

The QCA Code has ten broad principles, a reduction from twelve principles in the previous version, which have been divided into three sections. The ten principles are:

Deliver Growth


Establish a strategy and business model which promote long-term value for shareholders


Seek to understand and meet shareholder needs and expectations


Take into account wider stakeholder and social responsibilities and their implications for long-term success


Embed effective risk management, considering both opportunities and threats, throughout the organisation

Maintain a Dynamic Management Framework


Maintain the board as well-functioning, balanced team led by the chair


Ensure that between them the directors have the necessary up-to-date experience, skills and capabilities


Evaluate board performance based on clear and relevant objectives, seeking continuous improvement


Promote a corporate culture that is based on ethical values and behaviours


Maintain governance structures and processes that are fit for purpose and support good decision-making by the board

Build Trust


Communicate how the company is governed and is performing by maintaining a dialogue with shareholders and other relevant stakeholders

In applying the above principles, the QCA Code states that "you need to consider how your company applies each principle ... to the extent that the board judges these to be appropriate in the circumstances, and then provide an adequate explanation to your shareholders for the approach taken." As already noted, where a company departs from the principles, the company should "provide a well-reasoned explanation for doing so as part of its reporting on corporate governance."

AIM companies therefore need to consider which recognised corporate governance code they wish to adopt and then put in place a plan to disclose compliance by 28 September 2018. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.