Governance for AIM-Listed & Small-Cap Companies: The QCA Code Explained

Governance requirements for AIM-listed and other small-cap quoted companies are often assumed to be a lighter version of main-market governance. That's true in the sense that AIM companies aren't required to follow the full UK Corporate Governance Code — but "lighter" doesn't mean "optional," and the code most of them do follow, the QCA Corporate Governance Code, has its own specific requirements that accountants advising smaller listed companies need to know.

Why AIM companies need a governance code at all

AIM Rule 26 requires every AIM company to state on its website which recognised corporate governance code it applies, and to explain how it complies with that code or where it departs from it. AIM companies aren't required to use the main UK Corporate Governance Code, which was designed with premium-listed companies in mind, but they must apply something — and in practice, over 90% of AIM companies choose the Quoted Companies Alliance (QCA) Corporate Governance Code.

The QCA Code's ten principles

The QCA Code, most recently revised in 2023 (recommended for accounting periods starting on or after 1 April 2024), sets out ten principles built around three themes: delivering growth, maintaining a dynamic management framework, and building trust. Unlike the main Code's "comply or explain" approach, the QCA Code operates on an "apply and explain" basis — companies must apply each of the ten principles in a way appropriate to their circumstances and explain how they've done so, rather than being able to simply not comply and explain why.

Board composition on a growth-company budget

One of the more practical challenges for smaller quoted companies is board composition: the QCA Code expects an appropriate balance of executive and independent non-executive directors, but a £50 million market-cap company doesn't have the same pool of candidates or the same budget as a FTSE 100 business. The Code's flexibility exists precisely to accommodate this — what matters is that the board can demonstrate independent challenge is genuinely happening, not that it mirrors a large-cap board structure it can't realistically support.

The nominated adviser relationship

Every AIM company must retain a Nominated Adviser (Nomad) at all times, and losing one without replacing it within a defined period leads to suspension from trading. The Nomad's role touches governance directly: they assess the company's suitability for AIM on admission and on an ongoing basis, and are expected to be satisfied the board understands and is meeting its governance and disclosure obligations. For finance teams, this means the Nomad relationship is as much a governance checkpoint as it is a listing-rules one.

Practical compliance reporting

QCA Code compliance is typically reported through a dedicated corporate governance statement on the company's website, updated annually and whenever a material change occurs — it can't simply be buried in the annual report and left static. Investors and proxy advisers increasingly check this disclosure directly, and a stale or generic governance statement is one of the more visible red flags they look for.

FAQ

Do AIM companies have to follow the UK Corporate Governance Code? No — AIM Rule 26 requires a recognised governance code, but AIM companies typically choose the QCA Code, which is designed for smaller and growth companies.

What happens if an AIM company doesn't comply with its chosen code? Under "apply and explain," the company must set out how it has applied each principle; simply not applying a principle without explanation is a breach of AIM Rule 26.

Is the QCA Code only for AIM companies? No — it's also used by companies on the Aquis Growth Market and other smaller quoted companies outside AIM.

For background on the AIM market itself, see our guide to what AIM is and how it operates. To build CPD specifically in this area, explore Learnsignal's Corporate Governance CPD courses, or read more broadly on how corporate governance knowledge supports career advancement.

Adopting a code for the first time

A company preparing for AIM admission, or moving onto a recognised code for the first time, is generally best served by starting with an honest gap analysis against all ten QCA principles rather than drafting a compliance statement first and working backwards. Board composition and independence are usually the areas requiring the most lead time to address properly, since replacing or adding a non-executive director isn't something that can be arranged in the final weeks before admission. Engaging the Nomad early in this process, rather than only once the governance statement is drafted, tends to surface gaps while there's still time to close them.

Keeping the statement current

A governance statement drafted at IPO and never substantively revisited is a common weak point picked up by investors and proxy advisers. Board changes, a new committee structure, or a material change in strategy should all trigger a review of how the company's disclosure against each QCA principle reads — not just an annual refresh timed to the AGM.