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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 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.

Corporate Governance on AIM: new QCA research report


On 26 November 2019, the QCA published a new research report on Corporate Governance on AIM.


Following the London Stock Exchange’s change to AIM Rule 26 in September 2018, which required all companies on AIM to adopt a corporate governance code, over 900 companies on the market chose to adopt the QCA Corporate Governance Code.


This report is a survey of these companies and investigates what companies thought about the process of adopting the Code and how it may have helped them. The survey analyses findings from 139 respondents, as well as results from 15 qualitative interviews with companies and investors.


The key findings are highlighted below:

  • 39% of companies say that adopting the QCA Code has helped their business;
  • 40% of companies have disclosed more information to the market as a result of adopting the QCA Code; and
  • 75% of companies regard the disclosure requirements of the QCA Code as “just right”.

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

AIM Rule 57


At the end of October, the London Stock Exchange published AIM Rule 57. The publication highlights its revised proposed amendments to the AIM Rules for Companies and AIM Rules for Nomads if no transitional or other agreement is reached before the UK leaves the EU on 31 January 2020.


The amendments for a no-deal Brexit are largely the same as the amendments published earlier in the year. However, there are changes to both the AIM Rules for Companies and the AIM Rules for Nomads. The changes to the AIM Rules for Companies include taking into account the Prospectus Regulation and will come into effect in the event of a no-deal Brexit. The changes to the AIM Rules for Nomads includes amendments intended to clarify how the Exchange applies the rules relating to qualified executives, which came into effect on 1 November 2019.


To view AIM Rule 57, please do so here.

FRC sets out expectations for corporate reporting


In an open letter to all Audit Committee Chairs and Finance Directors, the FRC has called for improvements to corporate reporting. The letter reflects findings from the FRC’s Annual Review of Corporate Reporting, as well as sets out expectations for companies to improve their reporting to address matters of concern to investors and improve trust in business.


The FRC expects companies to improve the quality of reporting of forward-looking information and emerging risks to future business strategy. This forms part of attempts to enhance public trust in business by demonstrating that management is aware of the potential impact of emerging risks, is open and transparent, and is managing the business effectively.


Companies are expected to think beyond the period covered by their viability statement and identify key risks that challenge their business models in the long-term, as well as having a particular focus on environmental issues.


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

IA Principles of Remuneration


At the beginning of November, the Investment Association published their updated Principles of Remuneration for 2020. The Principles have been updated to reflect current best practice and the focus on executive remuneration remains.


The key areas of the IA’s Principles of Remuneration for 2020 are as follows:

  • Alternative remuneration structures – as a result of the growing concerns of IA members over the effectiveness of Long-Term Incentive Plans, investors are increasingly open to alternative remuneration structures.
  • Discretion on vesting outcomes – the discretion section has been updated to include the suggestion that Remuneration Committees should introduce discretion into their incentive schemes which would allow them to limit the vesting outcomes if a specific monetary value is exceeded. 
  • Approach to pensions – pension contributions for executive directors should be aligned with the majority of the workforce.
  • Shareholding requirements and post-employment shareholding requirements – shareholders expect post-employment shareholding requirements to be introduced for all new policy approvals.
  • Levels of remuneration – IA members are continually concerned by incremental increases to both fixed pay and variable pay.
  • Pay for performance – the link between pay and performance needs to be clearly seen.

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

Auditors need to improve their challenge of management


A recent report published by the FRC, Developments in Audit, finds that the quality of audit is not consistently reaching the high standards expected. In particular, the report highlights the challenge of management as a key impediment to delivering high quality audits. Specifically, the report finds that auditors struggle to sufficiently challenge management on areas such as long-term contracts, goodwill impairment and the valuation of financial instruments.


Other key findings outlined within the report include:

  • Auditors were not properly identifying relevant controls in areas of significant risk or were not adapting their audit approaches significantly where controls were found to be deficient.
  • Year-on-year familiarity with the same audited entities can lead to the same approach being followed even when changes demand a different strategy.
  • Auditors too often accept what management tells them rather than questioning their plausibility.
  • Audit teams often accept unrealistic deadlines, resulting in inadequate work.

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

The Law Society and CLLS Q&A on PSC Registers


The Law Society and the City of London Law Society have jointly published a Q&A on the Register of People with Significant Control (PSC Register). They have worked together with the Department for Business, Energy and Industrial Strategy (BEIS) to create a Q&A which will help all those who have to work with the PSC Register.


The main purpose of the Q&A is to highlight areas of complexity within the regime which are not specifically covered by the PSC Register primary and secondary legislation.


The main areas covered within the Q&A are as follows:

  • holding shares/votes/board appointment rights
  • indirect interests/majority stake
  • trusts/funds
  • reasonable steps, restrictions and warning notices
  • position on incorporation

If you wish to view the Q&A, you can do so here.

ISS Benchmark Policy updates


On 11 November 2019, ISS published their proxy voting guidelines updates and process for their 2020 benchmark policy. There were two changes relevant to the UK. This included changes to policy on board gender diversity and Remuneration Committees.


In terms of board gender diversity, ISS have introduced a new policy to recommend a vote against the chair of the nomination committee when there are no female directors on the board of a widely-held company.


Regarding Remuneration Committees, the change relates to the Investment Associations Principles of Remuneration, and in particular, their reference to the inclusion of non-financial performance criteria in variable remuneration, such as relating to environmental, social and governance (ESG) objectives. As such, the policy update expands ISS’ view on ESG risks within the remuneration framework.


If you wish to view updates to ISS policy, you may do so here.

Glass Lewis updated Guidelines for 2020


Earlier in the month, Glass Lewis published their proxy advice guidelines for 2020. The guidelines include changes to:

  • Gender diversity;
  • Board skills;
  • Audit committee meetings;
  • Smaller premium-listed companies;
  • Salaries and pensions;
  • Incentive plans;
  • Post-exit shareholding requirements;
  • Threshold vesting under LTI plans; and
  • Remuneration committee discretion.

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

Hampton-Alexander Review report


On 13 November 2019, the fourth annual Hampton-Alexander Review report was published. The report is based on improving gender balance in FTSE leadership and sets a target to have 33% of senior leadership positions in the FTSE 350 being held by women by the end of 2020. Generally speaking, the findings make for positive reading and represent improvements from the results produced last year.


The key findings from the report state that:

  • Women now hold 32.4% of FTSE 100 board positions (up from 30.2% in 2018)
  • Women now hold 29.6% of FTSE 250 board positions (up from 24.9% in 2018)
  • The FTSE 350 has two all-male boards (down from 5 in 2018)

To read the report, please do so here.

IA responsible investment framework


On 18 November 2019, the Investment Association publish its final report on the Responsible Investment Framework. The report has been produced as a result of the investment management industry coming together to agree a common framework and product categorisation for responsible investment approaches. The report has been produced in order to help savers better access funds with a focus on environmental and social outcomes.


The framework categorises and provides standard definitions for the different components of responsible investment.


If you wish to view the framework, please do so 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.

BEIS Committee recommendations to help avoid next corporate collapse


In light of the collapse of Thomas Cook, the BEIS House of Commons Select Committee has called for measures to help avoid the next corporate collapse. This includes a series of recommendations on corporate governance, executive remuneration and audit reform.


The Committee’s recommendations include that:

  • Changes are made to executive pension contributions in order to create a fairer system.
  • Bonus scheme arrangements should use pre-defined measures.
  • The FRC’s successor should develop guidelines to ensure that bonus rewards are for exceptional performance only.
  • The implementation of legislation to ensure that all FTSE 100 companies publish their workforce data, which includes a breakdown of ethnicity and pay band.
  • Accountancy practices relating to goodwill should be reviewed.
  • Audit firms should be required to make a clear separation between the audit and non-audit parts of their business.

If you wish to see the recommendations, please do so 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. 

Survey for companies on the challenges of being listed


Oxera are currently conducting a survey on behalf of DG Financial Stability, Financial Services and Capital Markets Union at the European Commission. The survey will analyse the design and functioning of primary equity markets in the EU. In particular, the survey will look at the challenges faced by companies of being listed.


The survey is seeking the views from key financial decision-makers within companies of the decision relating to acquiring a listing.


Should you wish to take the survey, you may 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 responded to the Law Commission’s call for evidence on intermediated securities.


To view the response, please click here.


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

  • ESMA: MAR Review Report

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



This section provides information on any upcoming events the QCA may be holding or relevant events that members may be interested in.

FCA SME issuer event


The FCA are hosting the event, Navigating the public disclosure regime as an SME, in order to introduce SME’s to the work of the FCA’s Primary Market Oversight department. The event will aim to help assist companies in navigating the regulatory landscape as a small to medium-sized issuer, particularly with regard to the Market Abuse Regulation (MAR).


The main topics of focus will include:

  • Corporate disclosure of inside information;
  • Relevant policy pipelines
  • Common activities that increase the risk of unlawful disclosure of inside information
  • Corporate transactions
  • Insights from the FRC’s Financial Reporting Lab.

Further details along with registration for the event can be found here.


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