Revised QCA Corporate Governance Code

The Quoted Companies Alliance (QCA) has published a new version of its Corporate Governance Code (QCA Code) on 13 November 2023. The revised QCA Code which will apply for financial years beginning on or after 1 April 2024 (with a grace period of 12 months).

The QCA Code is followed by most AIM companies and some unlisted companies who are required to ‘comply or explain’ with a recognised corporate governance code. The QCA Code was first published in 2013 (last updated in 2018) and provides a flexible and less prescriptive framework (compared with the UK Corporate Governance Code published by the Financial Conduct Authority for listed companies on the Main Market) of corporate governance principles. The QCA Code sets out ten broad corporate governance principles (with explanations) and details of the disclosures which companies that have adopted the Code should make in their annual reports and accounts.

Main changes

Briefly, the following are the main provisions of the revised QCA Code:

• more emphasis on promotion of corporate culture based on sound ethical values and behaviours
• understanding the needs and expectations of all elements of the company’s shareholder base (controlling shareholders should put in place a relationship agreement to protect minority shareholders)
• maintaining good relationships with different stakeholders (suppliers, customers, employees, etc) by understanding their needs, interests and expectations
• emphasis on devoting attention to the workforce and ensuring that the company’s practices towards its employees are consistent with its values
• board to be responsible for the company’s approach to the relevant environmental and social issues, including issues that relate to climate change
• focus on enterprise-wide internal controls and assessment of risk
• new focus on the independence of the board of directors, including a list of indicators of independence for consideration, reflection on the board’s levels of diversity, composition of the board and its committees and their skill set
• detailed provisions on succession planning for both executives and non-executives, contingency planning for absence of key staff and appointment of directors
• the establishment of an effective remuneration policy which aligns the company’s purpose, strategy and culture, should motivate long term growth and shareholder culture, is easy to understand by participants, sets appropriate incentive targets and the annual remuneration report and
• an annual advisory vote on the directors’ remuneration report; remuneration policies should at least be put to an advisory shareholder vote (with consideration given to a binding vote) and any significant amendments to existing employee share schemes or long-term incentive plans also to be subject to shareholder vote

Our comments

It would be necessary for companies that adopt the QCA Code to review the revised Code and assess the changes that they would need to make with regard to their practice. In particular, consideration should be given to the composition and appointment of board members in the light of the new independence principles, succession planning in respect of both executive and non-executive directors and taking steps to ensure the relevant disclosures that would be made in their annual reports.

The provisions relating to remuneration are new to the QCA Code, although they reflect principles contained in the QCA’s guidance for remuneration committees. They will require companies to review their approach to remuneration disclosures in their annual reports

For further information, please contact JD Ghosh or Stuart James or Paul Norris.

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