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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.

QCA 2020 Budget Representation

With the announcement of the Budget for Wednesday 11 March, the QCA submitted its Budget Representation to the Chancellor and HM Treasury on Wednesday 22 January. The submission is used to communicate the key issues that affect our membership, as well as to propose recommendations to make improvements in order to ensure that the tax system gives smaller companies the appropriate platform they need to grow and develop.

In our Budget Representation, we argue that the taxation system must be formed on three central pillars:

  • Competitiveness – in order to ensure that the UK’s taxation system remains competitive, it is crucial that a regime is built that both incentivises and enables smaller, growing companies to raise capital more cheaply and efficiently. To do so, we propose that the Government, amongst other things, addresses the preferential treatment of raising debt finance over equity finance so that smaller companies can raise the long-term, sustainable capital they need to facilitate their growth.
  • Simplicity – the UK’s taxation system would benefit greatly if the tax system was simplified. At present, the system is one of the most complex in the world, which can be particularly onerous for smaller companies. To simplify the system, we urge the Government to strengthen the Office of Tax Simplification, exempt smaller companies from the most burdensome reporting requirements and modify employee share plans. Doing so will lower compliance costs and remove barriers to growth for smaller companies.
  • Certainty – it is crucial that small and mid-size quoted companies are able to effectively plan for their future development with confidence. In order for this to be achieved, we encourage the Government to establish a binding ruling service, provide further clarification over transfer pricing and clarify the implications of the UK’s withdrawal from the EU on the taxation system. This will allow companies to make the long-term investment decisions that will help drive sustained economic growth.

 To read the submission, 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. 

WEF on sustainable value creation

The World Economic Forum, in collaboration with Deloitte, KPMG, EY and PwC, have issued a new report: Toward Common Metrics and Consistent Reporting of Sustainable Value Creation. The report seeks to address some of the practical challenges involved in balancing short and longer-term business pressures, as well as the lack of consistency by which companies report to investors and stakeholders on the sustainable value they create.


The report intends to help companies measure and disclose the relevant aspects of their performance on environmental, social and governance matters and their contribution to progress the Sustainable Development Goals on a consistent and comparable basis. In so doing, the report puts forward a common set of metrics and recommended disclosures so that companies can align their mainstream reporting and reduce fragmentation.


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

FRC review of governance


In a new report, the FRC determine that companies need to improve their governance practices and reporting if they are to promote trust in business and demonstrate their positive impact on wider society and the economy.


The report finds that improvements have been made following the changes to the UK Corporate Governance Code in 2018, but that a greater focus on long-term sustainability is needed. This includes an increased focus on stakeholder engagement, diversity and corporate culture.


The FRC reviewed reporting against the 2016 UK Corporate Governance Code and the early adopters of the 2018 Code. Key findings include:

  • Good examples of reporting by companies using incentives relating to non-financial matters.
  • Many companies grappling with defining purpose and what an effective culture means.
  • Insufficient consideration of the importance of culture and strategy, or the views of stakeholders.
  • Limited reporting on diversity.

To read the report, please click here.

ESMA on short-termism in securities markets


This month, the European Securities and Markets Authority (ESMA) published its finding on potential undue short-term pressures in securities markets, following an investigation by ESMA, EBA and EIOPA on the sources of short-termism on corporations.


In the report, ESMA make a range of recommendations for the European Commission to consider for actions in key areas. These areas include:

  • Disclosure of Environmental, Social and Governance factors, including:

o   Amending the Non-Financial Reporting Directive (NFRD);

o   Promoting a single set of international ESG disclosure standards; and

o   Requiring the inclusion of non-financial statements in annual financial reports.

  • Institutional investor engagement, including:

o   A review of the White List under the Takeover Bids Directive;

o   A potential shareholder vote on the non-financial statement; and

o   Monitoring the application of the Shareholder Rights Directive (SRD II).


To view the report, you may do so here.

FRC revised ethical and auditing standards


Towards the end of last month, the FRC moved to strengthen auditor independence and ban conflicts of interest when they issued a major revision to their Ethical Standard and revised Auditing Standards. These developments form part of the FRC’s attempts to support the delivery of high-quality audit in the UK. The changes seek to ensure that the UK is seen as an attractive place to do business because of strong investor protection due to high quality audit.


The revised standards incorporate changes to international ethical requirements, which now prohibit auditors from providing recruitment or remuneration services.


To read the Standards and Guidance for auditors, please click here.

CIIA Internal Audit Code of Practice


The Chartered Institute of Internal Auditors recently published an Internal Audit Code of Practice, which aims to enhance the overall effectiveness of internal audit, and its impact within organisations. The recommendations within the code of practice are principles-based and can be used as a benchmark of good practice against which companies can assess their internal audit function.


The code should be applied proportionately, meaning that companies should apply the code in light of their size, nature and complexity of their operation. In total, the code makes 38 recommendations, which were formulated as a result of a consultation processes where a range of stakeholders submitted their views.

ESMA announces key priorities for 2020-22


On 9 January 2020, ESMA published its Strategic Orientation for 2020-22. The Strategic Orientation is a document that sets out ESMA’s line of work over the next few years. As part of this, ESMA will work on identifying risks related to Environmental, Social and Governance (ESG) factors to promote transparency on these issues by issuers and market participants. 


Significantly, ESMA also state their intentions to protect the growth and development of small and mid-cap companies, explaining that they will take into account the nature, scale and complexity of the risks inherent to the activities of these companies. They also mention that they intend to engage with national authorities on matters of proportionality, asking for feedback on any perceived costs and benefits. To do so, they will establish a dedicated proportionality committee.


If you wish to read ESMA’s Strategic Orientation, please click here.

SDGD recommendations


The Sustainable Development Goals Disclosure (SDGD) Recommendations offers a new approach for companies and other organisations to consider to address sustainable development issues. The approaches set out in the recommendations are aligned to the International Integrated Reporting Framework, the Task Force on Climate-related Financial Disclosure, and the Global Reporting Initiative and attempt to establish a best practice for corporate reporting on SDGs. This will enable more effective and standardised reporting and transparency on climate change and social and environmental issues.


The report has been published by the global accountancy bodies and were developed through a consultation process. The report provides useful steps to guide SDG implementation against four overarching themes, which include: governance; management approach; strategy and performance and targets.


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

FRC Lab workforce reporting


The FRC’s Financial Reporting Lab (the Lab) recently published a new report on workforce-related corporate reporting. In the report, the Lab highlight the need for improvement on reporting on workforce-related issues in order to meet the needs of investors and reflect new regulations and wider societal expectations on areas including executive pay, contractual employment and the implications of automation.


The Lab’s report provides guidance and examples for companies on how they can improve the workforce-related information they report. This is particularly useful as investors are increasingly concerned with how the workforce creates value, how that value is maintained and what risks may arise in the future. In addition, more and more stakeholders are also interested in understanding more about workforce matters, such as culture, employee engagement and the workforce environment. In order to help companies achieve this, the Lab have also published a summary of the report, which includes questions companies should be asking themselves about their reporting on workforce matters.  

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.

Thomson Reuters Public M&A trends


Thomson Reuters have reviewed the public M&A trends and highlights of 2019 and produced a report summarising the key activities over the course of 2019. The report covers firm and possible offers announced in 2019 for target companies traded on the Main Market or on AIM.


The report finds that bid activity levels in 2019 have increased markedly when compared to the levels of the previous year, as well as a substantial increase in private equity bids. Despite this, there has been a drop in the number of bids with a value of £1 billion or more compared to 2018.


In spite of the Brexit uncertainty evident in the last quarter of 2018 (as the original date of the UK’s withdrawal from the EU approached) this does not appear to have had a similarly negative impact on the level of activity in 2019. In looking ahead to 2020, Thomson Reuters conclude that there is optimism for M&A activity, but that this is likely to be contingent on the path that Brexit takes. 

NAO report on Government’s support to SMEs


On 15 January 2020, the National Audit Office published two reports which look at Government’s support to business. The first report, Business support schemes, looks at the management of the support government, and in particular the Department for Business, Energy and Industrial Strategy, provides to businesses. The second, British Business Bank (BBB), examines the impact of the BBB on small and mid-size enterprises access to finance.


The reports find that the support government provides to business is fragmented between different departments and that it lacks overall coordination and prioritisation. As a result, the NAO recommends that BEIS coordinate a review of its schemes to help determine their strategic fit with the Industrial Strategy. In addition to this, the NAO call on the government to clarify the role it wants the BBB to perform and what it wants to achieve in delivering support to business.


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 submitted a response to EIOPA’s consultation on the Opinion on the 2020 review of Solvency II.


In the consultation, we stressed the importance of measures that encourage active investment in the small and mid-size company community and our opposition to proposals which might be a disincentive to the flow of funds to these companies, highlighting their contribution to the UK economy.


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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