The Evolving Role of AIM-Listed Business Chairs: Preparing for 2025 and Beyond

By Paul Battye Chief Executive of Hoffman Reed

The chair of an AIM-listed company occupies a unique and pivotal role, which is often more hands-on than the chair’s role in larger, main-market listed companies. With the UK’s corporate governance landscape continuing to evolve, especially with the upcoming 2024 revisions to the UK Corporate Governance Code, AIM-listed chairs must remain adaptable and proactive to ensure the long-term success of their businesses.

1. Governance Oversight and Board Leadership

AIM-listed companies, which tend to be smaller and more agile, require chairs who can blend strategic oversight with operational involvement. Unlike the more structured corporate governance standards of larger companies, AIM allows for flexibility through a ‘comply or explain’ framework, as outlined in both the 2018 and 2024 versions of the UK Corporate Governance Code.

However, it’s advisable for AIM companies to align with as many governance best practices as possible, as this strengthens their reputation with investors and stakeholders. Chairs should ensure their boards are not only effective in decision-making but also diverse, inclusive, and aligned with the company’s values and strategy. The 2024 Code emphasizes board accountability for long-term success and effective internal controls, which should be a key focus for AIM-listed chairs.

2. Building Strong Relationships with Key Stakeholders

Unlike chairs of larger businesses, AIM-listed chairs often play an active role in managing relationships with key shareholders. As many AIM-listed companies have illiquid shares, shareholders may turn to the chair for guidance, especially when engagement with the CEO or executive directors is not sufficient.

The upcoming 2024 revisions highlight the need for chairs to regularly engage with shareholders and ensure their views are heard and acted upon by the board. Chairs must also balance this with fostering strong relationships with the NOMAD (Nominated Adviser), who provides essential regulatory oversight and guidance to AIM-listed companies.

3. Succession Planning: A Chair’s Crucial Responsibility

One of the most critical responsibilities for AIM-listed chairs is ensuring that a robust succession plan is in place, not only for the CEO but for other key leadership roles as well. Succession planning goes beyond simply identifying replacements—it involves cultivating internal talent and preparing the organization for leadership transitions, should they become necessary. The 2024 UK Corporate Governance Code further stresses the importance of a transparent, merit-based succession plan that promotes diversity and inclusion within senior management.

4. Ensuring Effective Internal Controls and Risk Management

The 2024 UK Corporate Governance Code brings a renewed focus on internal controls and risk management. It’s imperative for AIM-listed companies to demonstrate that they have effective internal control frameworks in place to manage risks and ensure the sustainability of the business. While AIM companies may not be required to comply with the same level of scrutiny as their main-market counterparts, adopting strong internal control measures will enhance investor confidence and prepare the company for potential growth and listing on the main market in the future.

5. Supporting the CEO and Leading the Board

The relationship between the chair and the CEO is arguably the most important within any organization. As an AIM-listed chair, your role is to support the CEO, providing counsel and guidance while allowing them to lead the business effectively. However, when necessary, the chair must step in, particularly if the company is not meeting its strategic goals or if there are issues with leadership performance.

Additionally, the chair is responsible for ensuring the board remains focused on medium- and long-term strategic issues rather than becoming bogged down in day-to-day operations. By fostering a board culture that encourages debate and diverse perspectives, the chair can ensure that governance practices drive the company’s success in a fast-paced and ever-evolving market.

6. Preparing for 2025 and Beyond

With the 2024 revisions to the UK Corporate Governance Code coming into effect on 1^st January 2025, AIM-listed companies have a unique opportunity to enhance their governance practices. Chairs must be prepared to adapt to the new expectations, particularly around internal controls, board evaluations, and stakeholder engagement.

Conclusion

To conclude, the role of an AIM-listed chair is multifaceted and demanding, but with the right approach to governance, strategy, and stakeholder engagement, you can help your company thrive in 2024 and beyond. Your leadership will be instrumental in navigating the evolving governance landscape, ensuring that your company is not only compliant but also positioned for long-term sustainable success.