Achievements
Launch of SIP and SAYE consultation – HM Treasury have published a consultation looking at the Share Incentive Plan (SIP) and Save As You Earn (SAYE) schemes. The QCA’s Share Schemes Expert Group has been pressing for reform on these schemes, and the consultation, which will look at opportunities to improve and simplify the scheme, is a welcome development.
Launch of the Non-Financial Reporting Review – the Department for Business and Trade (DBT) published a call for evidence on non-financial reporting in May 2023. The launch of the review follows a report the QCA published on the increasing length of Annual Reports and Accounts. The review will consider potential options for reducing the length and complexity of reporting requirements.
Changes announced to CSOP and EMI – at the Spring Budget 2023, HM Treasury announced certain changes to Company Share Option Plan (CSOP) and Enterprise Management Incentive (EMI) schemes. On CSOPs, the Government announced that businesses can now issues options over shares worth up to £60,000 to each employee (double the previous limit of £30,000). On EMI, companies will no longer have to include details in EMI option agreements of any restrictions on the shares, or declare that an employee has signed a working time declaration when they are issues an EMI option. Both of these changes will be applicable from 6 April 2023. The QCA’s Share Schemes Expert Group were heavily involved in the efforts to make these changes.
Launch of the Investment Research Review – as part of the Chancellor’s Edinburgh reforms, the Government announced the launch of the Investment Research Review (IRR). The decline in the quantity and quality of investment research provision in the UK has been a longstanding concern of the QCA’s, and we have engaged with the Government and regulator on multiple levels in order to highlight our concerns. The IRR will evaluate options to improve the UK market for investment research, including the damaging effects of the EU’s MiFID II rules, and will make a series of recommendations to this effect.
QCA State of the Small and Mid-cap Sector report – the QCA’s report was published following the Chancellor’s recent ‘State of the Sector’ Report to the House of Commons. As its name suggests and, in contrast to the Chancellor’s Report, this Report is focussed on the UK public markets as they apply to small and mid-cap companies. The report looks at why the markets are failing this critically important community, what steps are being taken to ‘fix’ the problems and what further steps should, in our view, be taken in this regard.
HM Treasury State of the Sector report – following a recommendation made by the QCA in its response to Lord Hill’s Listing Review, HM Treasury, in conjunction with the City of London Corporation, published the first annual report analysing the financial services sector of the UK. The report outlines key performance indicators, comparing the performance of the UK’s financial services sector with those of other jurisdictions. It also provides an overview of the initiatives the Government and regulators are working on to improve the overall environment for the sector. This included the principle of proportionality and embedding that into the regulatory framework.
The contribution of small and mid-caps – the QCA, in collaboration with Hardman & Co, published a new report: “Punching above their weight? The contribution of small and mid-cap quoted companies to markets, employment and tax revenues”. The report is a follow up from the one we produced in 2019 looking at the importance of small and mid-sized quoted companies. The report finds that small and mid-caps represent 91% of all quoted companies and have a total market capitalisation of £376 billion. These companies employ over 2.1 million workers and contributed over £25 billion in taxes in 2020/21.
Recommendations of the UK Secondary Capital Raising Review – the UK Secondary Capital Raising Review was published following the Chancellor’s Mansion House Speech was published in July. The Review, which was chaired by Freshfields’ Mark Austin, focuses on secondary capital raising process and contains a series of recommendations aimed at making it easier for public companies to raise money in the UK. We engaged with Mr Austin regularly both during and after the consultation period and feel that many of our concerns have been considered and addressed. We believe that the recommendations, if taken forward, will help to facilitate a healthier environment for companies seeking to raise additional capital in the UK.
Outcome of the Restoring trust in audit and corporate governance white paper – in May, the Government published the outcome of the BEIS consultation on audit and corporate governance reform. The initial proposals were a significant concern for small and mid-cap directors and the wider ecosystem as the reforms would mean vastly increased regulatory and administrative burdens. It was a huge win for small and mid-caps that, having weighed the views of consultation respondents, the Government reconsidered its expansion of the PIE regime from the €200 million threshold for AIM-quoted companies originally proposed. The test of 750+ employees and £750+ million in turnover has been taken forward and ensures that additional burdens will focus on companies that would have a significant impact on the wider economy, rather than simply considering a company of public interest if their shares are traded on public markets.
FCA announces broad overhaul of the listing regime – the FCA published its Policy Statement on its Primary Markets Effectiveness Review towards the end of 2021 (you can view the QCA’s summary here). The statement announces multiple changes aimed at making the UK’s markets more attractive. We engaged positively with the FCA both throughout and after the consultation period had ended and will continue to do so as they look to make changes to the market structure in 2022.
2021/22 AIM Good Governance Review – The QCA and UHY Hacker Young published its AIM Good Governance Review for 2021/22. The review focusses on the post-Covid-19 recovery; ESG; and board performance evaluations.
Changes to UK MiFID – after many years of lobbying the Government and regulators, both domestically and in Europe, on the negative impacts of MiFID II on the quality and quantity of research on small and mid-sized quoted companies, the QCA welcomes the FCA’s Policy Statement announcing changes to UK MiFID’s conduct and organisational requirements. In particular, the research exemption from the inducement rules for small and mid-caps with a market capitalisation below £200 million is especially welcome as we have advocated for many years for an exemption for smaller companies from the unbundling rules.
The contribution of smaller quoted companies to job creation – the QCA, in conjunction with Hardman & Co., published a report, “Good jobs come to those who IPO”, which discovered a significantly positive correlation between companies conducting IPO’s and expanding their workforce.
QCA survey on BEIS audit and corporate governance reform – The QCA successfully completed a survey, conducted by YouGov, which collected the views of over 200 small and mid-sized quoted companies and investors to provide compelling evidence against the potentially damaging reforms being proposed by BEIS. This was in addition to our comprehensive consultation response (see here).
The QCA Board Performance Review Guide – The QCA published its Board Performance Review Guide in 2021. The Guide provides practical guidance for companies in assessing and improving their approach to board performance reviews. The Guide follows on from the Board Performance Review Report the QCA published in conjunction with Henley Business School, which analysed the approach to board performance reviews at various organisations (see here).
The QCA Practical Guide to ESG – The QCA published its Practical Guide to ESG in 2021. The Guide, which was drafted with input from a wide range of stakeholders, particularly small and mid-sized quoted companies and their investors, intends to outline an approach to ESG that is proportionate to the resource constraints of smaller companies, while giving investors and stakeholders the information that they need. It details five steps that companies can take to further develop their approach to ESG.
2021 QCA and Peel Hunt Mid and Small-Cap Investor Survey – The QCA and Peel Hunt published the results of its small and mid-cap investor survey, which focussed on unlocking growth after the Covid-19 pandemic.
Lord Hill Listing Review Report – the Review recommended some significant reforms to the rules that govern how companies raise finance on public markets to ensure that the UK remains an attractive location for companies to list and grow. Of particular note was that the Review included several recommendations that took forward the proposals made in the QCA’s response to the consultation in relation to the Chancellor reporting to Parliament on the quality and attractiveness of the UK’s public markets, the need to re-invent the Standard Listing segment, and Prospectus Regulation reform.
QCA Remuneration Committee Guide – We revised and updated our Guide for company remuneration committees in 2020. The new Guide takes into account the interests of shareholders, executives, the wider workforce and other stakeholders in small and mid-sized quoted companies, and is designed to help committee members be effective in their roles.
2020/21 AIM Good Governance Review – The QCA and UHY Hacker Young published the AIM Good Governance Review which analysed the governance disclosures of 50 small and mid-caps. In particular, the report focussed on: how small and mid-sized quoted companies have responded to Covid-19; how investors examine corporate culture; and what investors want to see from companies in relation to ESG, remuneration and general governance disclosures.
QCA report: ESG in Small and Mid-Sized Quoted Companies – In conjunction with Henley Business School, the QCA published a new report that examines ESG adoption and practice in small and mid-cap companies. The report includes a number of questions that companies, and investors, can ask themselves with regards to their ESG policies and communication.
Covid-19 regulatory alleviations – throughout what was an incredibly challenging an ever-changing market environment, the QCA played both a pro-active and an active role in keeping its members informed and up to date with all the regulatory developments during the Covid-19 pandemic. The QCA also produced, contributed to, and endorsed, several pieces of guidance to ensure our members had the help they needed to tackle the many issues that the pandemic presented.
QCA research report: Retail Investment in Small and Mid-Sized Quoted Companies – The QCA, in conjunction with YouGov, published the result of a survey of over 500 UK retail investors for their views on small and mid-sized quoted companies. The report finds a number of practical points a company can use to form part of a strategy to increase retail investor engagement.
CSDR – The QCA worked over many years to highlight the potential negative impact on liquidity in small & mid-cap securities that bringing in the new EU settlement discipline regime (the Central Securities Depositories Regulation (CSDR)) would have caused. If implemented, its introduction would have had a seriously detrimental impact on the ability of smaller quoted companies to raise capital, as well as on the functioning of capital markets for SMEs in the UK. We welcome the Government’s decision to not implement it in the UK (see here).
QCA Non-Executive Directors Survey – The QCA published research on Non-Executive Directors in small and mid-sized quoted companies, which included information on: salaries; working hours; knowledge, skills and experience; independence; positions; value for money; board evaluations; and recruitment.
2020 QCA and Peel Hunt Small and Mid-Cap Investor Survey – The QCA and Peel Hunt published the results of its small and mid-cap investor survey, which highlighted current de-equitisation trends and what can be done about it. In particular, the results of the survey were used as evidence to stress to Government and the regulators the concerns of companies and investors.
Brydon Review of Audit: The report included QCA recommendations that any reform pays due regard to proportionality in relation to company size and resources
QCA Audit Committee Guide: We revised and updated our guide for company audit committees for 2019
European IPO taskforce: QCA CEO Tim Ward invited to join the new taskforce to influence the incoming European Commission on how to encourage IPOs
Corporate Governance on AIM Research Report: YouGov survey results find that 39% of AIM companies say that adopting the QCA Corporate Governance Code has helped their business
Contribution of small and mid-sized quoted companies: New research from QCA and Hardman & Co find that small & mid-caps make up 93% of UK quoted companies, employ 3 million people and contribute over £26bn in tax
QCA Corporate Governance Code: The publication of the updated QCA Corporate Governance Code and adoption by 89% of the companies on AIM.
UK Corporate Governance Code: The reinstatement of some smaller company exemptions in the UK Corporate Governance Code that were proposed to be removed in the FRC’s consultation.
Kingman review of the FRC: The Kingman Review accepts the QCA’s suggestion that the new regulator to replace the FRC has to act in a way that “is proportionate, having regard to the size and resources of those being regulated and balancing the costs and benefits of regulatory action”.
Entrepreneurs’ Relief: HMT’s relaxation of ER in the 2018 Budget, as well as the resolution of an anomaly on intangibles degrouping.
MiFID II: The FCA’s decision to continue to allow fund managers to receive small-cap investment research without payment where it has been commissioned and paid for by a smaller quoted company, including when issuing new shares.
Entrepreneurs’ Relief: HMT’s changing of the qualifying rules for Entrepreneurs’ Relief in the Autumn Budget to ensure that entrepreneurs are not discouraged from seeking external investment through the dilution of their shareholding.
Capital Gains Tax entrepreneurs’ relief – extension to long-term investors: We achieved the extension of entrepreneurs’ relief to external investors in unlisted trading companies for newly issued shares after a long-term campaign.
Simplifying the Prospectus Directive: We produced detailed proposals for changes to the Prospectus Directive so that companies are able to raise finance more efficiently. The European Commission’s proposal for amending the Directive included a number of our proposals, including an exemption for fundraisings below €10m from the need to have a prospectus, a minimum disclosure regime for secondary offers, a minimum disclosure regime for SMEs and companies on SME Growth Markets, and the ability for companies on SME Growth Markets to incorporate information by reference into their prospectuses.
Became a member of the Takeover Panel: We became a nominating body of the Takeover Panel as it was felt that the smaller company constituency should be represented. Our CEO, Tim Ward, is our appointed representative on the Takeover Panel and our former Chairman, Michael Higgins, as our alternate.
Reduced the Financial Reporting Council levies for small companies: We campaigned for the proposed Financial Reporting
Council levies to be reduced following the FRC’s plans to increase them in its Draft Plan, Budget and Proposed Levies 2015/16. The Financial Reporting Council took on board our comments and reduced the proposed levy increase for companies with the smallest market capitalisations.
Campaigned against proposed restrictions on how investment research is paid for: We participated in the MiFID II review and responded to
the FCA’s proposals on the use of dealing commissions to ensure that investment research in small and mid-size quoted companies is not eroded.
Persons of Significant Control (PSC) Register: We are working with BIS, as members of the PSC register working group, to develop the statutory and non-statutory guidance that will accompany the PSC register and ensure that the administrative burden impact on small and mid-size quoted companies is reduced.
CSD Regulation – ESMA’s basic cash penalty rate proposal originally neglected the differences in liquidity of shares, setting penalties which would in effect disproportionately penalise small and mid-size quoted companies and the trading of their shares. After we stressed that this unintended effect and provided evidence to support it, ESMA amended the Technical Advice to the Commission in its Final Report, recommending that penalty rates should duly consider the liquidity of the instruments and significantly reducing the penalty rates for illiquid shares and SME Growth Market shares.
Audit Committee Guide for Small and Mid-Size Quoted Companies: We published our revised guide for audit committee members to assist them in being effective in their roles, meeting the expectations of investors and complying with best regulatory best practice for small and mid-size quoted companies.
Market Abuse Regulation and insider lists: We successfully campaigned for an exemption in the recently reviewed Market Abuse Regulation so that companies on SME Growth Markets, such as AIM and ISDX, will not have to produce insider lists.
Removal of stamp duty on the trading of AIM and ISDX shares: We successfully campaigned for the removal of stamp duty on growth market shares, which came into effect on 28 April 2014.
Are You Ready to Grow as a Quoted Company?: We published our revised guide, which helps companies to evaluate whether they are prepared and suitable to raise finance on a public equity market. Covering areas such as business models, characteristics of good management teams, corporate governance and liquidity, the guide describes some of the ideal attributes of quoted company from an investors’ point of view.
AIM Rule 26: We successfully campaigned for a change to AIM Rule 26 to help improve governance behaviour, which requires AIM companies to state on their website the corporate governance code they apply, how they comply with the code, or if no code has been adopted, state this and explain its current governance arrangements.
IFRS Foundation’s Disclosure Initiative: We successfully campaigned for the IFRS Foundation to consult on the issue of disclosure overload and materiality.
Engineering Growth for Small and Mid-Size Quoted Companies: We held our annual one-day conference to highlight the importance of small and mid-size quoted companies in the UK economy. Our keynote speakers was The Viscount Younger of Leckie, Parliamentary Under Secretary of State at the Department for Business, Innovation and Skills, and the day included panel sessions on the availability of finance, corporate governance, and fund managers and investment.
Corporate Governance Code for Small and Mid-Size Quoted Companies: We published our revised guide, which helps quoted companies put into practice appropriate corporate governance arrangements and encourage positive engagement between companies and shareholders. Our Code is widely recognised as an industry standard for those growing companies for which the UK Corporate Governance Code is not applicable.
Inclusion of AIM and ISDX shares into ISAs: We achieved the inclusion of AIM and ISDX shares in Individual Savings Accounts (ISAs) after a long-term campaign.
Engineering Growth for Small and Mid-Cap Companies: We held our first one-day conference to highlight the importance of small and mid-size quoted companies in driving economic growth. There were over 160 attendees and David Gauke MP, Exchequer Secretary to the Treasury, was our keynote speaker.
Remuneration Committee Guide for Smaller Quoted Companies: We published a new guide this year to help our members tackle the controversial issues surrounding executive pay and arm them with the latest information.
Engineering Growth for Small and Mid-Cap Companies: We held our first one-day conference to highlight the importance of small and mid-size quoted companies in driving economic growth. There were over 160 attendees and David Gauke MP, Exchequer Secretary to the Treasury, was our keynote speaker.
Remuneration Committee Guide for Smaller Quoted Companies: We published a new guide this year to help our members tackle the controversial issues surrounding executive pay and arm them with the latest information.
Prospectus Directive: Successfully campaigned for the European Commission and European Parliament to double the threshold above which a prospectus needs to be produced from €2.5m to €5m; to introduce a proportionate approach to disclosure for SMEs and companies on regulated markets with a market capitalisation below €100m; and to exempt issues under employee share schemes. This will all help to ensure small and mid-size quoted companies can raise capital more quickly and efficiently.
Small and Medium Listed Issuers: Campaigned with French and German trade associations for Christine Lagarde, French Minister for the Economy, Industry and Employment, to sponsor an independent review of European Directives affecting small and mid-size quoted companies. This resulted in Fabrice Demarigny, Partner at Mazars and former Secretary General of CESR, proposing measures for an EU Listing (Small Business) Act. The report followed extensive consultation across Europe and included several meetings with our members.
Enterprise Investment Scheme (EIS), Venture Capital Trusts (VCTs), AIM shares’ inclusion in ISAs: Working closely with the London Stock Exchange and other market participants, we campaigned for the Treasury to extend current tax incentives, such as allowing AIM shares to be included in ISAs, widening the scope of EIS and VCTs and ensuring any CGT reliefs are beneficial for the sector. This resulted in the announcement by the previous administration of a consultation to consider changes. We were subsequently able to put forward our proposals in person to the Secretary of the Exchequer ahead of the Emergency Budget.
Are You Ready Guide: Launched a new guide for companies aspiring to go public, endorsed by leading figures of the investment community.
HM Treasury Roundtable Discussions with our members: Improved our engagement with HMT officials in their Primary Market team through setting up four roundtable discussions on general market improvements, involving corporates, stockbrokers, other advisers and investors. We also organised a specific roundtable discussion on non-bank lending to put corporates views directly to Treasury officials.
E-petition on Number 10 website: We attracted 462 signatures for our petition requesting the previous administration to set up a working group to design an appropriate structure for UK equity markets. The petition was closed as a result of the change of government.
Review of the Prospectus Directive: Following our campaigning, a number of our proposals were consulted upon in the review of the Prospectus Directive. These include the possibility of a simplified prospectus document, raising the current annual amount (€2.5m) which can be raised without having to produce a prospectus, removing the need for a prospectus for offers to existing shareholders, and exempting issues under Employee Share Schemes.
Pre-Budget Report: A number of our proposals to ease the impact of the current economic crisis were included in the Chancellor’s Pre-Budget Report, including a withdrawal of the planned increased in the small companies’ rate of corporation tax and additional carry back of losses up to £50,000 for three years.
Financial Reporting Council’s Combined Code Review: We achieved a concession whereby, in a company outside the FTSE 350, the Chairman may be a member of the Audit Committee (but not its Chairman), so long as he is deemed independent on appointment.
Climate Change Act: Achieved delay to section 80 of the Bill (which called for all companies that have to produce a Business Review to report on their carbon emissions), until there a generally accepted method of measurement and reporting has been developed.
New AIM Rules: As part of our NOMAD committee’s (now the Corporate Finance Expert Group) work on the new AIM Rules introduced in February 07, achieved removal of blanket disclaimer on AIM documents proposed by Stock Exchange.
Filing dates: Our Tax Expert Group campaigned against the Government’s proposal to align the dates for submitting tax returns to HMRC with submitting accounts with Companies House, which would have accelerated tax return preparation by at least three months. The Pre-Budget Report in December 2006 announced that there would be no change.
Directors’ Liability: Our Legal Expert Group successfully campaigned against the Treasury’s proposal to extend the new liability regime of the Transparency Directive to AIM companies.
Company Law: Along with the ABI and the IoD, we successfully campaigned for the government to include greater protection against litigation as part of the shake-up to company law and ministers agreed to adopt a ‘safe harbour’ system.
Prospectus Directive: With APCIMS, we overturned a potentially costly and time-consuming UK interpretation of the Prospectus Directive relating to capital raising by small and mid-size quoted companies.
Operating and Financial Review: Together with other organisations, we successfully persuaded the DTI (now BIS) to loosen the legal structure of their original proposals and the involvement of auditors. This move should enable company directors to produce more meaningful reports for shareholders, and also avoid extra audit costs.
London Stock Exchange fee reduction: We, along with many other bodies, registered their disappointment with the substantial fee increases introduced in April 2002, especially as they were introduced alongside cuts in service levels. The LSE announced that the fee increases were to be reduced.
Transparency Directive: We successfully campaigned strongly against the mandatory nature of the proposal requiring all quoted companies to publish quarterly profit/loss accounts.
Higgs report: We were asked to provide company representatives to give their views on Corporate Governance to Derek Higgs during the research phase of his work. Their comments led to the creation of the small and medium sized company chapter. We also obtained a key concession, with small and mid-sized quoted companies only required to have two NEDs, saving companies considerable costs over time.
Profile of the sector: The FT dropped its small and mid-size quoted company sector coverage in 2003. We made representations that coverage should continue to encourage investment in the sector. It was reinstated, with a specific column dedicated to small and mid-size quoted companies. The Times subsequently increased its small cap coverage.
Original Prospectus Directive Proposals: Following our campaigning activities, the requirement for all quoted companies to update their prospectus annually was dropped by the Commission. This’win’ is estimated to have saved quoted companies an average of £100k per annum.
EIS relief: Original proposals were for this relief to apply only to companies with under £10m of gross assets. Due to continued QCA lobbying activities, this threshold was increased to £30m.