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

Kingman Review of the FRC

In December 2018, Sir John Kingman deliver the results of his review into the future of the FRC.

The report reflected a number of the QCA's suggestions, including ensuring that a new regulator to replace the FRC should have to act in a way that is proportionate in regard to the size and resources of the companies it oversees.

Among the report’s 83 recommendations are:

  • Replacing the FRC as soon as possible with a new independent regulator with clear statutory powers and objectives – the Audit, Reporting and Governance Authority (ARGA).
  • Ensuring that ARGA is accountable to Parliament, with the Chair and Chief Executive subject to a pre-approval hearing with the BEIS Select Committee, and appearing annually in front of the Select Committee.
  • Granting ARGA the overarching duty of promoting the interests of consumers of financial information, not producers. It should also have a duty to promote competition; to promote innovation; and to apply proportionality to all its work.
  • Appointing a new board to ARGA, which is “representative” of stakeholder interests.
  • The government should review the UK’s definition of a Public Interest Entity (PIE).
  • Ensuring that ARGA’s corporate reporting work is extended from its current limited scope to cover the entire annual report. It should be given stronger powers to require documents and other relevant information in order to conduct that review work.
  • Requiring ARGA to promote brevity and comprehensibility in accounts and annual reports, to engage meaningfully with investors and asset owners about their information needs, and to ensure the proportionality and value of reports. The regulator should report on its assessment of the extent to which the statutory reporting framework is serving the interests of users of company reports at least once in every Parliament.
  • Ensuring that ARGA fundamentally shifts its approach with respect to the revised Stewardship Code, so that it more clearly differentiates excellence in stewardship. It should focus on outcomes and effectiveness, not on policy statements. If this cannot be achieved, and the Stewardship Code remains simply a driver of boilerplate reporting, serious consideration should be given to its abolition.
  • Doing away with the voluntary funding mechanism of the regulator. Instead, BEIS should put in place a statutory levy for ARGA.
  • Making sure that ARGA is able to attract staff of the calibre, expertise and seniority necessary to hold those regulated to account, by recruiting more partner-equivalent staff, adding weight and commanding more substantial respect in conversations with firms.
  • Banning ARGA staff, or board or committee members from ever working on any regulatory functions relating to a past employer, removing themselves and/or delegating to others as necessary.

With respect to the next steps, Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy (BEIS), has said that the government will take forward the recommendations set out in the Review to replace the FRC with a new independent statutory regulator with stronger powers in 2019.

You can read the Kingman Review here

You can read the QCA’s response to Sir John’s independent review here.


FRC Future of Corporate Reporting Advisory Group

In December 2018, the Financial Reporting Council has announced the members of its Future of Corporate Reporting Advisory Group. You can read the full list here.

The QCA noted that the group lacks any small company representation and this was raised with Sir Win Bischoff, Chairman of the FRC. He responded that the views of the QCA and of smaller companies will be sought.


Spring Statement 2019

The Chancellor's Spring Statement for 2019 has been scheduled for 13 March. See here for confirmation.


Preparing for Brexit

The Government is maintaining a number of resources to help businesses prepare for different Brexit scenarios. See:


Policy consultation responses

In January 2019, the QCA’s Corporate Governance Expert Group contributed to the response to the Department for Business, Energy & Industrial Strategy’s (BEIS) on Ethnicity Pay Reporting. See the response here.

The QCA is currently seeking member input on the below consultations:

If you have any comments to contribute on any of these, please get in touch with Anthony Robinson, Head of Policy & Communications,


What corporate governance codes do AIM companies follow?

The results of our analysis of which corporate governance codes AIM companies follow and found that:

  • 89% follow the QCA Code
  • 6% follow the FRC’s UK Corporate Governance Code
  • 4% follow the code of another country or territory
  • 1% follow a small range of other codes

See the results here


Small & Mid-Cap Sentiment Index

The H2 2018 results of our Small & Mid-Cap Sentiment Index were released in December. Findings included:

  • Small and mid-caps remain optimistic about their own prospects – 74% expect to increase the number of employees in the next 12 months
  • 47% of small and mid-caps plan to raise capital in the next 12 months
  • 67% of companies and 72% of advisors believe the new AIM Rule 26 (requiring companies to adopt a recognised corporate governance code) will improve the integrity of AIM.

See the results here


Corporate Governance Behaviour Review 2018/19

In cooperation with UHY Hacker Young, we analysed the corporate governance disclosures of 50 AIM companies.

Read the Corporate Governance Behaviour review here


New QCA Policy Adviser

We are happy to announce that Jack Marshall has joined the QCA as a new member of the policy team.

His title is Policy Adviser and he can be reached at


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