UK: Preparation Is Key

Last Updated: 6 September 2019
Article by Ben Harber and Shaun Zulafqar

A joint publication from the FRC and the ICAEW recently provided practical suggestions for audit committees and boards of smaller listed and AIM quoted companies seeking to deliver high quality financial and risk reporting

Building on the themes from its 2015 discussion paper, the Financial Reporting Council (FRC) noted the general perception amongst smaller listed and AIM quoted companies is that their annual reports were not read by investors and as such, smaller quoted companies failed to prioritise or dedicate sufficient time to producing high quality annual reports. Rather than being seen as opportunities to communicate and engage with shareholders and potential investors, reports are often treated as a tick box exercise with most companies only complying in areas where they are required to do so.

A Clear Strategy

Time and resource constraints are often at the heart of poor quality reports as it is often the case that these reports are prepared at the last minute. After all, the ongoing costs of remaining listed or the cost of being admitted to AIM are felt more by smaller companies than their larger counterparts, therefore having a dedicated resource (whether it be within the finance or governance function) to manage the production of the company’s annual report is usually regarded as an unnecessary or additional cost which the company cannot afford to incur. However, companies who are guilty of this fail to realise the potential benefits of high quality reporting and how this could assist them in the long term, especially in reaching potential investors.

Below are a few things for consideration before embarking on the production or drafting of the annual report:

  • first and foremost try to understand the regulatory compliance and reporting obligations that come with being listed on AIM e.g. the AIM rules, any corporate governance changes, changes to your chosen code of governance or financial reporting standards and how these will apply
  • read the FRC’s annual review of corporate reporting (released every October) and take into consideration the FRC’s expectations of targeted subjects, think about what information shareholders and potential investors are likely to be interested in
  • schedule meetings with the relevant departments/individuals as soon as the prior year financial statements have been signed off, draw up a timetable and begin working on the narrative sections of the annual report before the year-end
  • consider the company’s motive for listing on AIM and budget accordingly to manage regulatory burdens e.g. cost of auditing and printing the report.

Corporate Governance

Since September 2018, the London Stock Exchange (LSE) has published a number of updates to the AIM rules for companies. The most significant being the change to AIM Rule 26, which requires companies to follow a recognised corporate governance code and to disclose the extent to which they have complied with that code.

The focus of the UKCGC, QCA and AIC codes remains on culture, stakeholder engagement and ensuring that the company has a well-functioning and diverse board. Both codes also highlight the importance of having an appropriate balance between executive and non-executive directors supporting the board through committees that have the necessary skills and knowledge to discharge their duties and responsibilities effectively. Understandably, smaller growing companies often appoint non-executive directors for commercial reasons or for their knowledge/expertise in the company’s field.

However, investors place higher value on board members who have a good track record when it comes to corporate governance e.g. being directors independent of the company, experience and engagement in the financial reporting process.

As a further result of their size and if no independent directors are present on their board, smaller quoted companies aren’t as rigorously challenged by their audit committees or board on the quality of
their annual reports in comparison to larger companies.

Improving Areas of Investor Focus

It’s important that annual reports maintain a balance of high-quality financial and non-financial reporting, ensuring that all information in the report is relevant and engaging to investors. The following are keys areas of improvement highlighted by the FRC in its 2018 thematic review of Reporting by Smaller Listed and AIM Quoted Companies:

  • alternative performance measures and strategic reports
  • pension disclosures
  • cash flow statements
  • accounting policies, including critical judgements and estimates
  • cash flow statements
  • tax provisions.


As mentioned above, planning is key. In our experience, smaller listed companies benefit from appointing a project manager for the production of their annual report - project management could fall to the company secretary or the chairperson of the audit committee. The project manager’s role is to define a workable timetable taking internal and external resources into consideration and determining the level of flexibility within the timetable in order to avoid delay to other deliverables within your annual report. The project manager should also define those responsible for sections of the annual report and highlight any key considerations or changes in reporting that the board or advisors need to be made aware of.

The company secretary regardless of whether they are appointed as project manager should conduct a gap analysis to assess current compliance with the company’s chosen code of governance and highlight areas of improvement that can enhance disclosures made in the annual report.

We would also suggest that boards create a feedback loop from institutional shareholders on the company’s previous annual report in order to address any shareholder concerns on lack of reporting. Good preparation, defining a timetable and assigning clear roles and responsibilities will assist in improving the disclosures and subsequently the annual reports for smaller listed and AIM quoted companies. 

Ben Harber FCIS is a Partner and Head of Company Secretarial Services, Shakespeare Martineau

Shaun Zulafqar GradICSA is a Company Secretary, Shakespeare Martineau

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions