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Corporate governance: "Comply or explain" for AIM companies

With effect from 28 September 2018, all AIM companies will be required to "comply or explain" against a recognised corporate governance code and make the details, which are subject to annual review, available on their AIM Rule 26 website.

AIM company boards are free to choose which recognised corporate governance code they decide to apply and should pick one which is appropriate to their stage of development, sector and size.  Examples of relevant codes include the Quoted Companies Alliance’s Corporate Governance Code and the Financial Reporting Council’s UK Corporate Governance Code.

The “comply or explain” approach requires AIM companies to provide a meaningful explanation of their practices against the principles of the corporate governance code they select so that investors can gain an understanding of their approach to governance.  Simply identifying areas of non-compliance without such a meaningful explanation will not suffice.   

An AIM company's corporate governance disclosures should be made available on its AIM Rule 26 website and should be reviewed (and if necessary updated) annually.  The website should also state the date on which the disclosures were last reviewed. The London Stock Exchange expects this annual review will be conducted at the same time as an AIM company prepares its annual report and accounts.

The new disclosure requirement comes into effect on 28 September 2018 which should give AIM companies sufficient time to prepare.  In addition, all new applicants to AIM must state which corporate governance code they intend to adopt but have until 28 September 2018 to fully comply with the new rules.

AIM companies should consult with their nominated advisers and other professional advisers to ensure that they are in a position to "comply or explain" against their chosen corporate governance code by 28 September 2018.  Please get in touch if you would like us to help with this review.


These notes have been prepared for the purpose of this article only. They should not be regarded as a substitute for taking legal advice.


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