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Directors' Knowhow is a monthly article which highlights changes and updates of relevance to small and mid-size quoted companies.

QCA publications and policy updates


This section of the Directors’ Knowhow features all of the publications produced by the QCA and any relevant updates that have occurred over the last month.

QCA & Peel Hunt Mid & Small-Cap Survey 2020


The latest edition of the QCA/Peel Hunt Mid & Small-Cap Survey investigates the views of fund managers and small and mid-size quoted companies across several overarching themes. These include:

  • The current de-equitisation trends on UK public markets and what can be done about it;
  • The impact of regulation and MiFID II on liquidity, research and broking houses; and
  • How companies can thrive in these conditions.

Some of the key findings from the survey are as follows:

  • 75% of companies and investors are concerned over the de-equitisation of UK stock markets.
  • 60% of companies say burdensome listing requirements and excessive scrutiny is the main driver of the shrinking UK public markets.
  • 79% of investors think MiFID II has had a negative impact on small and mid-cap liquidity. This perception has significantly increased since 2017.

To view the results of the survey, please click here.

Reports, guides and regulation


This section features some of the key legislative/regulatory developments and changes, as well as any new reports or guidance issued by industry bodies or regulators, over the last month.

IA shareholder priorities for 2020


The Investment Association have released their shareholder priorities for 2020, supporting long-term value in UK listed companies. The report outlines the four areas that the IA’s members asked them to prioritise to drive long-term value. This includes:

  • Responding to climate change – companies need to proactively identify and take action to manage climate-related risks to their business;
  • Audit quality – investors want to see high quality audits to ensure that the Annual Report and Accounts can be relied upon to make long-term investment decisions;
  • Stakeholder engagement – this is crucial for navigating a complex business environment and helping companies adapt to the needs of their workforce and the society they operate in; and
  • Diversity – listed companies should look to take forward the Hampton-Alexander Review and the Parker Review relating to female and ethnic representation on boards respectively.

The document outlines investor expectations on each issue and the actions the IA is taking to improve them, as well as the Institutional Voting Information Service’s (IVIS) approach to assist members in monitoring the improvements companies are making.


If you wish to view the IA’s priorities, you may do so here.

Hardman & Co. on share ownership for the many not the few


Early in February, independent research provider, Hardman & Co., published a paper on share ownership. The survey is based on a statistical survey of share ownership. The two key findings from within the survey indicate that:

  • Investors from the rest of the world dominate the main market; and
  • Individual investors are becoming more important.

Interestingly, the report finds that UK retail investors hold around a third of AIM shares (29 per cent) and hold as much as 87 per cent of NEX shares, demonstrating the importance of retail investors for companies on AIM and the NEX Exchange.


If you wish to read the report, please do so here.

FRC plan for greater regulatory oversight


On 5 February 2020, the Financial Reporting Council (FRC) announced a significant overhaul of its oversight and supervisory functions to speed up the pace of enforcement investigations. Within the Draft Plan and Budget 2020/21, the FRC outlines its commitment to improve transparency in relation to its supervisory functions, as well as act in a proportionate and evidence-based manner.


However, several of the propositions outlined within the draft relate to enhancing certain requirements. For instance, the FRC’s priority in relation to updating the UK Corporate Governance Code will seek to enhance requirements on internal controls, risk management, going concern and resilience/viability. In addition, certain areas of the draft require further clarification.


The QCA are in the process of putting together a response to the draft in order to ensure the needs of smaller companies are taken into consideration.


If you wish to view the FRC’s Draft Plan and Budget 2020/21, please click here.  

ESMA sustainable finance strategy


On 6 February 2020, ESMA, the EU’s securities markets regulator, published its strategy on sustainable finance. The strategy outlines how ESMA will place sustainability at the forefront of its operation by incorporating Environmental, Social and Governance (ESG) factors in its work. Some of the key priorities for ESMA include transparency obligations, risk analysis, ESG investing and convergence of national supervisory practices on ESG factors.


The sustainable finance strategy has been produced as a result of emerging trends and shifts in investor preferences. Investors are increasingly looking towards green and socially responsible products and are increasingly concerned with sustainability factors affecting the risks, returns and values of their investments.


If you wish to read the report, you may do so here.

ERS Bulletin


On 11 February, HMRC released an Employment Related Securities (ERS) Bulletin. The ERS Bulletin provides information and updates on developments relating to ERS, including tax-advantaged employee share schemes.


This ERS Bulletin includes information on:

  • EMI State Aid;
  • Registering a new scheme;
  • Most common ERS issues;
  • Cease a scheme registered in error or no longer required;
  • HMRC’s contact address for share schemes enquiries; and
  • Changes to HMRC email addresses.

On EMI State Aid, HMRC have confirmed that the EU Commission’s decision on the EMI Scheme will continue to apply until at least the end of the transition period on 31 December 2020.


To view the ERS Bulletin, please click here.

FRC/BEIS letter for accountants and auditors during transition period


The FRC, in conjunction with the Department for Business, Energy and Industrial Strategy, have published joint letters for accountants and auditors with information regarding auditing, accounting and corporate reporting standards during the transition period following the UK’s exit from the EU.


Information for accountants can be found here.


Information for auditors is available here.

FRC announce major review of how companies and auditors deal with climate change


The FRC recently announced a major review of how companies and auditors assess and report on the impact of climate change. As part of the review, the FRC will assess the extent to which UK companies and auditors are adequately responding to the impact of climate change on their business to ensure reporting requirements are being met. It will consider how the quality of information can be improved to support more informed decision-making by both investors and stakeholders.


The FRC will encourage better practice by:

  • Reviewing a sample of company reports and accounts;
  • Assessing a sample of audits;
  • Assessing the resources available in audit firms to support the evaluation of the impact of climate change;
  • Evaluating the quality of disclosures under the UK Corporate Governance Code; and
  • Evaluating whether the Lab’s report on the TCFD framework has been adopted.

If you wish to read more on the review, you may do so here.

HLF CMU interim report


On 20 February 2020, the High-level Forum (HLF) for the Capital Markets Union (CMU) published its interim report on the CMU. The HLF consists of a group of 28 high-level capital markets experts from across the EU that the European Commission tasked to review the progress made since the CMU Action Plan was launched in 2015 and propose new targeted actions to advance the CMU.


The final report will be published in May 2020.


If you wish to read the interim report, you may do so here.

PLSA shareholder guidelines


The Pensions and Lifetime Savings Association recently published their Stewardship Guide and Voting Guidelines 2020. The guidelines have been updated to reflect the UK Stewardship Code 2020 and its heightened focus on Environmental, Social and Governance (ESG) issues. The guide covers:

  • The policy framework for scheme stewardship;
  • Why good scheme stewardship is about more than voting;
  • The PLSA’s Corporate Governance Policy;
  • The PLSA’s voting guidelines.

The main changes to the guidance include:

  • An increased focus on stewardship guidance, including three checklists on stewardship, engagement and voting.
  • The Corporate Governance Policy, which sets out terms for what investors should look for from companies.
  • A revised approach to its voting guidelines on board leadership, company purpose, risk and internal control, remuneration and audit, amongst other things.
  • The addition of sections in the voting guidelines on climate change and sustainability.

If you wish to view the guidelines, you may do so here.

FRC guidance on coronavirus


Following the outbreak of the coronavirus, the FRC has published guidance for companies on disclosure of risks and other reporting consequences arising from the spread of COVID-19.


As part of their reporting requirements, a company is required to disclose principal risks to their business. The FRC is advising companies to carefully consider what disclosures they made need to consider in their year-end accounts, which is particularly relevant for companies having close relations with China. This could include operations or manufacturing in China and the potential staff shortages and production delays.


If you wish to view the guidance, please do so here.

ICAS case studies on section 172 responsibilities


The Institute of Chartered Accountants of Scotland has published a collection of case studies aimed at supporting the application of directors’ section 172 duties. They have been collected from a wide range of board members in both private and listed companies and outline the judgements that board members apply and how different aspect are considered.


The aim is to illustrate areas of good practice and covers a range of scenarios from the following themes:

  • managing cost reductions;
  • investment and growth;
  • stakeholder and reputation management;
  • supporting longer-term success;
  • effective governance – managing challenges to exert influence; and
  • environment, social and governance issues (ESG).

If you wish to see the case studies, please click here.

Articles, news and speeches

This section features relevant news, articles and publications for small and mid-size quoted companies that has been published in the last month.

SMF report on strengthening employee share ownership


The Social Market Foundation recently released a report on strengthening employee share ownership in the UK. The report analyses the scope to promote wider employee share ownership, as well as highlighting the benefits of operating a scheme. The report also assesses the potential for employee share ownership to reduce inequality, tackle the UK economy’s productivity crisis, improve financial resilience and increase employee voice within companies.


If you wish to read the report, please click here.

Surveys and questionnaires

This section features surveys or questionnaires submitted by industry bodies or regulators that are relevant to small and mid-size quoted companies. 

QCA share schemes survey


We are currently running a survey seeking the views of our corporate members on employee share schemes in order to understand more about the schemes you operate/do not operate, as well
as your reasons for doing so. The survey should take less than 5 minutes to complete and can be taken 

QCA remuneration survey


We are also updating our Remuneration Committee Guide in the coming months and, as a QCA member, we would like your input to help shape this. Please give us your views on the remuneration challenges you face/see via this online survey:

QCA research on ESG and board evaluation


The QCA is looking for chief executives, chairs, non-executive directors and investors to participate

in our research projects.


The first project will look into the ESG engagement, perceptions and practices of companies and investors on AIM and the Main Market.


The second project will delve into the board evaluation practices of growth companies, which will be used to provide insights that will enable growth companies to develop informed and effective board evaluation practices.


If you wish to participate in one or both of these projects, or would like some more information, please contact

AI and corporate governance


EY has been tasked by the European Commission-DG JUST to conduct a study on the relevance and impact of artificial intelligence (AI) for company law and corporate governance. The study should contribute to a better understanding of the actual and potential use of AI by companies, directors and shareholders in order to perform certain company tasks.


Should you wish to take the survey, please do so here.


This section provides an update of any recently submitted QCA consultation responses, as well as the consultation responses the QCA is currently drafting.

QCA policy consultation responses


The QCA’s Secondary Markets Expert Group contributed to the response to the London Stock Exchange’s consultation on market structure and trading hours.


To view he response, please click here.


The QCA’s Share Schemes Expert Group contributed to the response to HMRC’s consultation on the Fifth Money Laundering Directive and Trust Registration Service.


To view the response, please click here.


Additionally, the QCA is currently seeking member input on the following consultation(s):

If you have any comments you wish to contribute on either of these consultations, please get in touch with Jack Marshall, Policy Adviser,


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