An opportunity to implement proportionate, tailored governance

The LSE’s consultation that preceded these rule changes highlighted the previous regime of ‘comply or explain’ against a recognised governance code had become ‘comply only’. In practice, many organisations felt compelled to demonstrate compliance against a recognised framework, even where alternative governance arrangements may have been more proportionate or better aligned to their size, maturity and strategic objectives.

The change to AIM rule 26 enables those responsible for governance frameworks in AIM listed organisations (and those potentially looking at a future listing) to adopt governance arrangements more suited to their size, circumstances and stage of growth.

The challenge for boards and governance teams is no longer simply demonstrating adherence to a recognised code. The emphasis shifts towards explaining why governance arrangements are appropriate for the organisation’s circumstances and how they support the delivery of strategy, effective oversight and sustainable growth.

A recognised code should still be the framework but the new flexibility enables truly meaningful, proportionate disclosure on the company’s approach to corporate governance covering five key areas:

1. Board composition: director names, brief biographical details (as would normally be included in an admission document) and whether they are independent.
2. The role, responsibilities and functions of each director in relation to the company’s strategy, commercial objectives and effective risk management.
3. Remuneration and performance: the structure (not the level) of executive and non-executive director remuneration, how this aligns with individual and business performance and how it is assessed.
4. Risk and controls framework: including the corporate governance committee(s) role(s) and responsibilities.
5. Investor relations: the approach to shareholder engagement.

As well as agreeing and implementing a more proportionate approach to corporate governance and disclosures, a key task for Company Secretaries will be to update the way annual reports, websites and other external-facing communications to reflect this new tailored approach. This will require organisations not only to update disclosures but also to revisit whether existing governance frameworks remain aligned to board priorities, investor expectations and future growth ambitions

Rewriting the rules on growth

This is how LSE have positioned the changes in their AIM Rules change snapshot. Other changes made – which are aimed firmly at driving growth include:

• Making it easier to join AIM – including by removing information duplication, the need for potentially costly third-party reports and the requirement for conversion of accounting standards when using UK GAAP.
• Enabling fundraising – enabling a temporary trading pause to help companies manage complex fundraising and approach a wider range of investors.
• Spotlighting the expertise of Nominated Advisers (Nomads) – reinforcing their role as strategic advisers supporting companies throughout their growth journey rather than focusing solely on compliance obligations.
• Providing agency to companies – through voluntary disclosure provisions to highlight engagement with proxy agents and a right of reply to third party commentary.
• Facilitating acquisitions – including a more proportionate approach for certain large acquisitions and removing market suspension when considering a reverse takeover.
• An express route for international public companies joining AIM from other markets.

While some changes may reduce administrative burden, they increase the importance of governance judgement, requiring organisations to demonstrate that governance arrangements remain appropriate, effective and aligned to business objectives. These changes provide organisations with a valuable opportunity to reassess their governance frameworks and ensure they remain aligned to strategy, stakeholder expectations and future growth plans.

How Bridgehouse can help

At Bridgehouse, we are supporting clients in evaluating the implications of the revised AIM framework and implementing governance arrangements that are proportionate, effective and capable of supporting long-term success.

Our governance advice is built on practical experience. We understand how the QCA Code sits alongside MAR and AIM Rules obligations and investor expectations, enabling us to provide integrated support including:

• Governance framework design
• Governance and compliance reviews
• Committee and Board reporting frameworks
• Stakeholder communications
• Board and executive briefings and training

If you would like to explore what the AIM rule changes could mean for your organisation, please contact us to speak with our expert team.